China’s Tencent Holdings reported an 8% rise in second-quarter revenue on Wednesday, driven by a recovery in its gaming business after a launch of a new mobile game in May that got off to a strong start.
The company’s core gaming business had faced headwinds, with revenue from China declining for two consecutive quarters since the fourth quarter of last year, partly hit by successful rollouts of rival games from competitors.
The business is now showing signs of recovery, helped by the release of long-awaited “Dungeon & Fighter Mobile” title which dominated top-grossing charts on Apple’s iOS platform in China for nearly a month since its release in May, according to industry data.
Tencent, the world’s largest video game company and operator of the WeChat messaging platform, reported revenue of 161.12 billion yuan ($22.5 billion) for the second quarter ended June 30. Analysts had expected 160.77 billion yuan, according to LSEG data.
“We did have a good quarter … but let’s not lose sight of the fact that we had a very challenging business environment in the past couple of years,” Tencent’s President Martin Lau said.
For the quarter, Tencent’s domestic gaming revenue rose 9% to 34.6 billion yuan, while international gaming revenue also increased 9% to 13.9 billion yuan.
The company said it spent HK$52.3 billion ($6.71 billion) on share repurchases in the first half of 2024, before expenses.
Earlier this year, Tencent pledged to more than double its 2024 buybacks to over HK$100 billion from HK$49 billion in 2023.
Chinese tech firms have increased share buybacks to boost investor confidence as the sector recovers from a regulatory crackdown. The trend comes amid concerns over China’s slowing economic growth.
Tencent’s online advertising revenue rose 19% to 29.9 billion yuan in the quarter, driven by strong ad spending from sectors such as gaming and education, despite challenging economic conditions.
The company’s management cautioned that the macroeconomic environment would pose challenges for some parts of its business. Tencent’s fintech services growth decelerated to a low single-digit percentage rate, in part due to weak consumer spending.
Like many of its internet peers, Tencent has invested heavily in artificial intelligence. The company’s quarterly operating capital expenditure jumped 144%, partly driven by investments in GPU servers.
The company said it already uses AI internally to augment its advertising business and the technology has increasingly contributed to its cloud computing business.
Tencent’s net profit in the second quarter rose 82% to 47.6 billion yuan.
($1 = 7.1484 Chinese yuan renminbi) ($1 = 7.7897 Hong Kong dollars)
