Tencent: Q2FY24 Financial Results and Strategic Developments

Founded in 1998, Tencent Holdings Ltd. has established itself as a leading technology conglomerate with a diverse portfolio that spans online entertainment, fintech and business services, advertising, media, education, and healthcare. The company’s core strength lies in its Online Entertainment division, which includes game development and publishing, social networks, and streaming services for video and music. Additionally, Tencent has made significant strides in fintech, providing online banking, insurance, and payment services, and its advertising division capitalizes on social networks, games, and web platforms.

Financial Performance in Q2FY24

In Q2FY24, Tencent demonstrated steady financial growth, reporting net revenue of 161,117 million RMB. This represents a 1.01% increase from Q1FY24, where the company recorded 159,501 million RMB in net revenue, and a 7.98% rise compared to 149,208 million RMB in Q2FY23. This continuous revenue growth reflects the company’s diversified revenue streams and its ability to adapt to market trends.

Tencent’s net revenue structure for Q2FY24 was distributed as follows:

• Value-added Services accounted for 48.92% of total revenue, contributing 78,822 million RMB.
• Online Advertising made up 31.31% of revenue, totaling 50,440 million RMB.
• Fintech and Business Services brought in 18.54%, amounting to 29,871 million RMB.
• Other Services accounted for 1.23%, contributing 1,984 million RMB.

As of June 30, 2024, Tencent’s Total Equity was 927,597 million RMB, marking a 10.32% increase from 840,816 million RMB in the same period last year. Total Assets were valued at 1,654,970 million RMB, while Total Liabilities amounted to 723,373 million RMB, positioning the company in a robust financial state.

Stock Performance

Tencent’s shares, listed on the Hong Kong Stock Exchange under the ticker symbol 700, are a key component of Hong Kong’s Hang Seng Index. As of Q2FY24, the company’s shares traded in the range of 297.8 HKD to 401.0 HKD. On April 2, 2024, the stock opened at 309.0 HKD and closed at 372.4 HKD on June 28, 2024. The weighted average number of ordinary shares in issue as of June 30, 2024, stood at approximately 9,318,000,000.

Strategic Highlights and Key Developments

Tencent made substantial progress in Q2FY24 across various segments of its business. One of the notable successes came from its Online Entertainment division. The mobile game Brawl Stars ranked third globally in terms of daily active users (DAU) during the quarter, driven by regular content updates and enhanced social features. Gross receipts for the game surged more than tenfold year-on-year.

In Tencent’s video streaming division, the company saw a 13% year-on-year growth in long-form video subscriptions, totaling 117 million as of Q2FY24. This success was largely driven by popular drama series such as “Joy of Life 2” and “The Legend of Shen Li.” Both dramas were produced by New Classics Media and broadcasted on Tencent Video, further cementing Tencent’s dominance in China’s entertainment market.

Mini Programs and Video Accounts

Tencent’s Mini Programs saw significant growth, with total user time spent increasing over 20% year-on-year. The programs benefited from their comprehensive commerce and content ecosystem, contributing to a double-digit percentage growth in GMV. Similarly, Video Accounts experienced a substantial increase in user engagement, as Tencent enhanced its recommendation algorithms and introduced more localized content. These platforms also helped drive seamless shopping experiences for users, strengthening the company’s e-commerce ecosystem.

AI and Technology Developments

Q2FY24 also marked the public release of Tencent’s AI assistant application, Yuanbao. Leveraging Tencent’s advanced foundation model, Hunyuan, Yuanbao possesses powerful image understanding, natural language processing, and AI search capabilities. This technological innovation is poised to position Tencent as a leader in AI-driven solutions across its diverse product offerings.

In the advertising division, Tencent upgraded its technology platform to better analyze user interests and deliver more relevant ad recommendations. By processing signals more frequently and extending the analysis time horizon, Tencent can provide deeper insights into user behavior, enhancing the overall effectiveness of its advertising.

Domestic Games and International Success

Tencent’s domestic gaming market saw revitalization in key titles such as Honour of Kings and Peacekeeper Elite, both of which resumed year-on-year growth in gross receipts during Q2FY24. The company also celebrated a major milestone in May 2024 with Naruto Mobile, which reached 10 million monthly average DAU.

Internationally, Brawl Stars reached historical highs in terms of DAU, achieving remarkable success through frequent updates and social features. Its gross receipts grew exponentially, solidifying the game’s place among Tencent’s most lucrative international titles.

Conclusion

Tencent’s Q2FY24 performance highlights the company’s resilience and ability to innovate in a highly competitive market. With strong financial growth, strategic expansions in entertainment, fintech, and AI, as well as a commitment to user engagement across its platforms, Tencent continues to solidify its position as a global technology powerhouse. Looking ahead, the company’s robust product portfolio and diversified revenue streams will likely drive continued success in future quarters.