Tencent Q3FY24 Analysis: Innovation and Growth in a Dynamic Landscape

Tencent, the Chinese technology conglomerate with a diversified portfolio across online entertainment, fintech, advertising, and AI, reported impressive financial and operational performance in Q3FY24. This quarter reflected Tencent’s focus on strengthening its core businesses while embracing technological innovation and expanding its global reach.

Financial Highlights: Robust Growth Across Metrics

Tencent delivered solid financial results, highlighting its resilience in a competitive market:

• Total Revenue: 167,193 million RMB, an 8.13% increase YoY and a 3.77% rise sequentially, driven by strong performance across its gaming, fintech, and advertising divisions.
• Gross Profit: 88,828 million RMB, up 16.08% YoY, reflecting improved cost efficiencies.
• Operating Profit: 53,333 million RMB, a 10.02% YoY increase, underlining its operational strength.
• Profit for the Period: 53,983 million RMB, a remarkable 46.77% YoY surge, benefiting from cost management and revenue growth.
• EPS: Basic and diluted earnings per share were 5.76 RMB and 5.64 RMB, respectively, underscoring value creation for shareholders.

The company continued its aggressive share repurchase program, buying back 94.9 million shares on the Hong Kong Stock Exchange for approximately 35,900 million HKD, reinforcing its commitment to enhancing shareholder value.

Business Segment Highlights

1. Value-Added Services (49.46% of Revenue)

Tencent’s core segment contributed 82,695 million RMB and showcased growth across gaming, music, and video services:

• Gaming:
  • Domestically, Honour of Kings and Peacekeeper Elite maintained strong gross receipts.
  • Internationally, VALORANT expanded to PlayStation and Xbox, achieving a 30% YoY increase in gross receipts.
  • The release of Delta Force demonstrated Tencent’s capability to innovate in multi-platform gaming, with high user engagement and retention rates.
  • Other evergreen titles, such as Naruto Mobile, reached record high DAUs, reinforcing their longevity.
• Music and Video Streaming:
  • Music subscriptions grew 16% YoY to 119 million, driven by improved recommendation algorithms and enhanced audio quality.
  • Long-form video subscriptions increased 6% YoY to 116 million, supported by the popularity of original series.

2. FinTech and Business Services (31.75% of Revenue)

Contributing 53,089 million RMB, this segment continued to capitalize on the rapid growth of digital payments and online financial services:

• Mini Programs’ GMV exceeded 2 trillion RMB, showcasing its growing utility in food ordering, EV charging, and healthcare.
• Mini Shops leveraged Tencent’s ecosystem, providing merchants with robust tools for customer acquisition and sales conversion.

3. Online Advertising (17.94% of Revenue)

Advertising revenue totaled 29,993 million RMB, benefiting from Tencent’s rich ecosystem of social platforms, gaming networks, and content. Innovations in Weixin Search, powered by AI, improved click-through rates and commercial queries, boosting advertiser engagement.

Technological Advancements: Tencent’s Edge in AI and Infrastructure

Tencent demonstrated its commitment to innovation through significant advancements in AI and digital infrastructure:

• Tencent Hunyuan Turbo:
  • An upgraded foundation model leveraging a heterogeneous Mixture-of-Experts (MoE) architecture.
  • Achieved a 2x improvement in training and inference efficiency while halving costs compared to its predecessor.
• QQ Platform Enhancements:
  • Comprehensive backend upgrades and the addition of Tencent Channels contributed to YoY growth in QQ’s mobile active users.

Strategic Highlights and Innovations

Gaming Dominance

Tencent reinforced its position as a global gaming leader:

• The international expansion of VALORANT and the multi-platform success of Delta Force highlight Tencent’s adaptability and innovation.
• Upcoming titles such as Gensei Online and SUPERVIVE promise further growth and engagement.

AI Integration

The deployment of Tencent Hunyuan Turbo reflects Tencent’s strategic pivot toward AI, enhancing its platforms’ efficiency and user experience.

Ecosystem Growth

The expansion of Mini Programs and Mini Shops continues to integrate commerce, content, and payment solutions seamlessly, driving adoption across industries.

Final thoughts

Tencent’s Q3 FY24 performance highlights its strength as a diversified technology conglomerate. With robust financial results, significant advancements in gaming and AI, and a clear focus on ecosystem growth, Tencent is well-positioned to navigate challenges and seize emerging opportunities.

As Tencent continues to innovate and expand globally, its strategic emphasis on shareholder returns, technological excellence, and user-centric platforms ensures its leadership in the evolving digital landscape.