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Chinese tech giant Tencent saw its Q1 2023 revenue jump 11% YoY to $21.4 billion amid relaxed industrial regulations.
Tencent Holdings posted its Q1 2023 results, reflecting the company’s fastest jump in quarterly revenue in over a year. The latest quarterly figures also mark a resounding rebound for the Chinese tech giant following a series of underwhelmingly flat quarters.
For Q1 2023, Tencent posted an 11% year-over-year revenue jump to 150 billion Chinese yuan ($21.4 billion) compared to analysts’ expectations of 146.09 billion yuan. The Shenzhen-based tech and entertainment conglomerate attributed the income increase to a boost in payment volumes, ad sales, and gaming. The rebound was part of a broader sound recovery in China’s domestic consumption, with the country easing its harsh Covid restrictions last December.
In its Wednesday report, Tencent said that net profit grew faster for the quarter. This development reflected a “positive revenue mix shift, operational efficiencies, and an easy base period”. The company’s profit attributable to equity holders came in at 25.8 billion yuan, representing a 10% climb YoY. However, analysts had expected a profit attributable to company equity holders’ figure of 31 billion yuan.
Investors anticipated that China’s economic reopening would boost local tech mainstays such as Tencent, and they were not disappointed. Tencent reported that a return to growth in domestic game sales helped its gaming business, as the Chinese economy grew 4.5% in Q1.
Tencent said that its popular local Honor of Kings game experienced record-high numbers in the year’s first quarter. In addition, other games like CrossFire PC and CrossFire Mobile benefitted from promotions featuring additional in-game content.
Tencent Q1 2023 Performance Marks Substantial Improvement from China’s 2020/21 Restrictive Regulatory Era
Tencent’s Q1 tech success is a far cry from late 2020 when the Chinese government imposed stricter regulations on the tech industry. At the time, Beijing embarked on a sweeping crackdown on companies, including Alibaba, JD.com, and Tencent. The government’s regulatory tightening impacted several tech bottom lines and wiped off a combined $1 trillion in value.
In 2021, Chinese regulators suspended new video game releases and imposed strict measures on usage among young children. However, in the last few months, Beijing has softened its stance on the industry and approved more titles for release.
At the height of the Chinese government’s grip on the local gaming and tech industry, Tencent increased its focus on international markets. The multinational holding company’s international gaming division experienced solid growth, with some titles seeing YoY growth of 30%.
Many expect artificial intelligence to command a decent amount of attention at Tencent’s upcoming earnings call. The reason is that AI is a globally-recognized emerging market that promises to be the next lucrative venture. Several companies in Asia, Europe, and America have embarked on AI schemes, and observers expect these offerings to intensify in the coming months.
In its earnings statement, Tencent explained it was investing in artificial intelligence capabilities and cloud infrastructure to meet posed opportunities. The company added that AI “[could] be a growth multiplier that enables us to better serve our users, customers, and society at large”.
Tencent’s executives are slated to speak with investors later today.