Tencent Earnings: Clear Path to Margin Expansion

Tencent’s latest first-quarter earnings validate our thesis that its monetization avenues are far from being maxed out. Although WeChat might seem to be a mature network, already having 1.3 billion users across China, there remains plenty of room to increase monetization by introducing new products and services. While the number of users may not rise significantly, usage and monetization still have a very long runway ahead, as evidenced by the strong growth in Video Accounts and Weixin search revenue during the quarter. Although Tencent does not currently dominate the short video or search engine segments, the inherent benefits of its services—such as the seamless integration of content sharing within its expansive social network—set the stage for potential future market leadership.