Tencent, the Chinese multinational conglomerate, announced an 11% increase in revenue in Q1, its fastest growth in over a year. The company reported a rise in payment volumes, ad sales, and gaming. The Beijing-based tech giant’s revenue was 150 billion Chinese yuan ($21.4 billion), beating expectations of 146.09 billion yuan. Profit attributable to equity holders of the company was 25.8 billion yuan, also surpassing expectations. The results mark a strong rebound for Tencent after several flat and negative quarters.
Domestic Consumption Recovery Boosts Gaming Business
Tencent’s gaming division benefited from a return to growth in domestic game sales, thanks to a solid recovery in domestic consumption in China. Honor of Kings, Tencent’s popular locally released game, saw record-high gross receipts in the quarter. Meanwhile, CrossFire PC and CrossFire Mobile attracted returning players, thanks to promotions aimed at internet cafes and additional in-game content.
AI Investment to Enable Better User and Customer Service
Tencent is investing in its AI capabilities and cloud infrastructure to better serve its users, customers, and society at large. The company expects AI to be a growth multiplier that will enable it to embrace the opportunities brought by foundation models. AI is a huge focus for the tech industry, with buzz surrounding the development of foundation models like OpenAI’s GPT-4 advanced language processing software.
The Chinese tech industry has faced intense scrutiny as part of a broader regulatory tightening by Beijing that began in late 2020 and wiped off more than a combined $1 trillion from the country’s biggest companies. However, there have been signs that the central government is softening its stance toward internet titans like Tencent, Alibaba, and Didi. In 2021, Chinese regulators froze the approval of new video game releases, which badly impacted Tencent. However, over the past few months, Beijing has loosened its grip on the industry, greenlighting more titles for release. Tencent is also boosting its focus on international markets amid a tougher gaming market at home. Its international gaming business saw strong growth, with the company’s battle royale title Valorant seeing year-on-year gross receipts growth of 30%. PUBG Mobile, another popular battle royale title, resumed sequential growth in daily active users.
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