Tencent’s revenues accelerate as China emerges from Covid lockdowns

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Chinese tech giant Tencent’s revenue surged in the first quarter as the world’s second-largest economy bounced back after the country’s zero-Covid policy ended.

The social media and gaming group reported an 11% increase in revenue to RMB 150 billion ($21.8 billion) in the three months to March on Wednesday, compared with a year ago. Its net profit increased by 10% to RMB 25.8 billion.

The turnaround comes after Tencent’s revenue fell 1% last year, the company’s first annual sales drop on record, hit by Beijing’s tough zero-Covid policies that cut advertising and spending on the group’s ubiquitous WeChat app.

The growth of ByteDance’s rival Douyin, TikTok’s sister app for China, had also stolen ad spending from WeChat. Tencent reported a resurgence in online ad spending, with revenue up 17% in the first quarter from a year ago as the group’s 1.3 billion WeChat users consumed an increasing number of clips in their video stream. app channels.

“We estimate that Tencent’s ad revenue has grown faster than ByteDance’s since December,” said Robin Zhu, an analyst at Bernstein, noting that channels accounted for the vast majority of the ad segment’s growth.

The company, with a market value of $420 billion, has also recovered from Beijing’s campaign to curb the power and influence of its burgeoning tech groups.

Over the past year, the group has slowed the pace of investing in emerging startups and has begun pruning its empire of Chinese tech holdings, including trimming stakes in e-commerce group JD.com and delivery leader of Meituan food.

Shoppers and diners checking out with WeChat Pay helped increase revenue in Tencent’s fintech segment by 14% in the first quarter from a year earlier, contributing about a third of the group’s total revenue.

Virtual armor sales and other upgrades in games like Honor of Kings AND Triple Match 3D it contributed another third of revenue, with sales in the domestic gaming sector growing for the first time in about a year as Beijing lifted strict restrictions on the sector.

But strict new limits on the amount of time children can play have meant that play time for this category of users has decreased by 96% compared to the same period last year.

Chief Executive Pony Ma said on Wednesday that the group is investing in the rapidly evolving field of generative AI. He said: “[We] they expect AI to be a growth multiplier that allows us to better serve our users, customers and society at large.”

The Shenzhen-based company has been among the quietest Chinese groups vying to replicate OpenAI’s recent advances in AI. While rivals Baidu and Alibaba have trumpeted their plans to great fanfare and released early versions of their AI bots for testing, Tencent has been more cautious about its AI plans.

The value of Tencent’s stakes in publicly traded companies stood at Rmb 473 billion on March 31, and the group marked the book value of shares in unlisted investee companies at Rmb 333 billion.

Tencent said it spent RMB 4 billion to buy back 12.5 million shares in the quarter.

Additional reporting by Eleanor Olcott in Hong Kong