Tencent’s revenues accelerate as China emerges from Covid lockdowns

Chinese tech giant Tencent’s revenues accelerated in the first quarter as the world’s second-largest economy lurched back to life after the ending of the country’s zero-Covid policy.

The social media and gaming group on Wednesday reported a 11 per cent rise in revenue to Rmb150bn ($21.8bn) in the three months to March, compared to a year ago. Its net profit rose 10 per cent to Rmb25.8bn.

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

The growth of rival ByteDance’s Douyin, TikTok’s sister app for China, had also been stealing advertising spending away from WeChat. Tencent signalled a resumption in online advertising spending, with revenues rising 17 per cent in the first quarter compared to a year ago, as the group’s 1.3bn WeChat users consumed a growing number of clips in the app’s Channels video stream.

“We estimate Tencent’s ad revenue has been growing faster than ByteDance’s since around December,” said Robin Zhu, analyst at Bernstein, noting Channels accounted for the vast majority of the advertising segment’s growth.

The company, with a market value of $420bn, has also been reeling from Beijing’s campaign to rein in the power and influence of its expansive tech groups.

Over the past year, the group has slowed its investment pace in emerging start-ups and begun pruning its empire of Chinese tech holdings, including trimming stakes in ecommerce group JD.com and food delivery leader Meituan.

Shoppers and diners checking out with WeChat Pay helped lift revenues in Tencent’s fintech segment 14 per cent in the first quarter compared to a year earlier, contributing about one-third of the group’s total revenue.

Sales of virtual armour and other upgrades in games like Honor of Kings and Triple Match 3D contributed another third of revenue, with sales in its domestic gaming business growing for the first time in about a year as Beijing lifted punishing restrictions on the industry.

But tough new limits on the amount of time that minors can play games meant that game time from this category of users fell 96 per cent compared to the same period last year.

Chief executive Pony Ma on Wednesday said the group was investing in the fast-advancing field of generative artificial intelligence. He said: “[We] expect AI to be a growth multiplier that enables us to better serve our users, customers, and society at large.”

The Shenzhen-based company has been among the quietest of 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 circumspect about its AI plans.

The value of Tencent’s holdings in publicly listed companies stood at Rmb473bn on March 31, and the group marked the carrying value of shares in unlisted investees at Rmb333bn.

Tencent said it spent Rmb4bn to repurchase 12.5mn shares in the quarter.

Additional reporting by Eleanor Olcott in Hong Kong