Tencent This fall 2024 earnings report

Tencent on Wednesday posted a fourth-quarter beat on high and backside line pushed by a surge in gaming and promoting income.

The corporate additionally notched a ramp-up in capital expenditure, which greater than tripled in 2024, because it presses forward with boosting its deal with synthetic intelligence amid intense competitors from Chinese language rivals like Alibaba. Tencent touted a hike in AI-related income in areas corresponding to cloud computing and promoting.

This is how Tencent did within the fourth quarter of 2024 versus Refinitiv estimates:

• Income: 172.4 billion Chinese language yuan ($23.9 billion), versus 168.9 billion yuan anticipated.
• Revenue attributable to fairness holders of the corporate: 51.3 billion yuan, in contrast with 46.03 billion yuan anticipated.

Income rose 11% year-on-year whereas revenue was up 90% versus the identical interval in 2023.

Tencent is named one of many world’s greatest gaming corporations. Home video games income in China rose 23% year-on-year to 33.2 billion yuan within the fourth quarter. Tencent stated this hike was resulting from a low base within the prior 12 months’s interval, in addition to development in a few of its hit video games, together with Honour of Kings and Peacekeeper Elite.

The annual development price for home video games accelerated within the December quarter, in contrast with the earlier three-month interval.

Worldwide video games income jumped 15% year-on-year to 16 billion. Over the previous few years, Tencent has stepped up efforts abroad with video games like PUBG Cellular, because the home video games market slowed amid macroeconomic and regulatory headwinds.

Tencent’s advertising and marketing companies — or its promoting enterprise — grew 17% year-on-year to 35 billion yuan within the fourth quarter. Tencent runs WeChat, China’s greatest messaging app with greater than 1.38 billion month-to-month energetic customers. The corporate has been engaged on monetizing these customers by means of completely different promoting merchandise corresponding to video and search.

Whereas Tencent is likely one of the world’s greatest gaming corporations, the tech big has additionally positioned a big deal with turning into a key synthetic intelligence participant in China during the last two years, placing out varied AI fashions.

On Tuesday, the corporate launched its Hunyuan3D-2.0 mannequin which might flip textual content or pictures into 3D graphics. In February, Tencent had unveiled Turbo S, an AI mannequin designed to reply consumer queries as shortly as attainable.

Tencent stated that AI is driving enhancements throughout varied merchandise inside the corporate.

Tencent stated its advertising and marketing companies enterprise development has been pushed by “sturdy” advertiser demand in addition to “ongoing enhancement of our AI-powered promoting infrastructure.” Tencent’s AI fashions enable it to serve makes use of with “extra related advert suggestions,” the corporate stated.

In the meantime, AI cloud income roughly doubled year-on-year in 2024, Tencent stated, although it declined to offer a particular gross sales quantity.

Tencent’s cloud computing enterprise is housed beneath its fintech and enterprise service division, which posted 3% year-on-year development within the fourth quarter to 56.1 billion yuan.

Nonetheless, Tencent stated that growing use of graphics processing models for inner makes use of has “restricted” the quantity of the chips which might be obtainable for exterior purchasers and subsequently has held again cloud companies income development too.

GPUs are key semiconductors required for the coaching and use of AI functions.

Tencent stated that, ranging from the fourth quarter, it has “stepped up” purchases of GPUs and it expects “accelerated income” for cloud companies because of this.

Tencent’s AI focus has include elevated spending, with the corporate’s capital expenditure of 2024 totaling 76.8 billion yuan — greater than tripling from 23.89 billion in 2023. Tencent stated a few of this spending went towards servers and graphics processing models.

Tencent stated it has re-organized groups and that the elevated investments will increase development.

“Beginning just a few months in the past, we have now reorganised our AI groups to sharpen deal with each quick product innovation and deep mannequin analysis, elevated our AI-related capital expenditures, and elevated our R&D and advertising and marketing efforts for our AI-native merchandise,” Tencent stated in its earnings assertion.

“We consider these stepped-up investments will generate ongoing returns by way of uplifting productiveness in our promoting enterprise and longevity of our video games, in addition to long term worth from accelerated client utilization of our AI functions and enterprise adoption of our AI companies.”

Buyers are nonetheless watching out for the way Tencent plans to monetize its AI investments, notably on its consumer-facing merchandise, like WeChat.

On that entrance Tencent is working with its personal AI fashions, in addition to with these of its rivals. The corporate has its in-house AI chatbot known as Yuanbao, which relies by itself Hunyuan foundational mannequin in addition to DeepSeek’s R1. Tencent has additionally sought to combine DeepSeek’s know-how throughout a few of its different merchandise, together with WeChat’s search options in China.

Tencent stated throughout an earnings name that it has deployed AI internally however is “ready for breakout development in client AI interactions” with merchandise corresponding to Yuanbao and WeChat.

Income from search in Weixin, the identify of WeChat for China-based customers, greater than doubled year-on-year within the December quarter, Tencent stated.

The Shenzhen-headquartered agency’s AI push is emblematic of the present state of competitors amongst China’s tech giants, which has been spurred on by startup DeepSeek and its extremely environment friendly synthetic intelligence mannequin that was launched earlier this 12 months.

AI updates have been launched thick and quick from corporations together with Alibaba and Baidu.

Final week, Alibaba launched a brand new model of its AI assistant app that might be powered by its personal Qwen AI reasoning mannequin. Baidu on Sunday launched two new fashions together with a brand new reasoning mannequin.