Tencent Holdings Ltd., the Chinese tech giant behind WeChat and some of the world’s top gaming titles, reported a 47% jump in third-quarter profits, beating analyst expectations amid strong performance in its gaming division and growing benefits from artificial intelligence (AI) tools.
This robust growth comes despite China’s slowing economy and underscores Tencent’s position as a dominant player in the global gaming and tech landscape.
For the quarter ending in September, Tencent’s net profit attributable to shareholders reached 53.23 billion yuan ($7.37 billion), surpassing estimates of 46.18 billion yuan. Revenue increased by 8% year-on-year to 167.19 billion yuan, just below analyst expectations but marking a notable upswing in key sectors.
Tencent’s gaming division was the standout performer, with domestic revenue up 14% year-on-year to 37.3 billion yuan, spurred by the popularity of flagship titles such as Honor of Kings and Peacekeeper Elite. The launch of the mobile game Dungeon & Fighter, developed in collaboration with Nexon, also contributed to the revenue surge, adding to Tencent’s resilience against economic headwinds in China.
International gaming revenue grew by 11% on a constant currency basis, reflecting Tencent’s ability to expand beyond domestic markets. Notably, Tencent-backed PC hit Black Myth: Wukong reinforced the company’s reputation as a powerful financier in the gaming industry. According to analysts, Tencent’s shift toward more in-house game development is helping the company gain creative control and ensure a steady pipeline of quality games.
Tencent’s advertising division also saw significant growth, with revenue increasing by 17% to 29.99 billion yuan, driven largely by demand for ads within its short-video, mini-program, and search features on WeChat. The company attributes this surge to its AI-powered advertising tools, which enhance ad targeting within its platforms. In June, Tencent upgraded its AI-powered ad service, leading to a nine-fold increase in accounts using the feature year-over-year, now totaling over 200,000.
The integration of AI tools extends beyond advertising, with AI capabilities bolstering WeChat’s search functions and click-through rates, thanks to advancements in large language models. Tencent’s AI applications have had tangible impacts on its operations, the company noted, and it plans to further invest in AI technology to benefit users and partners.
Tencent’s cloud computing and fintech segments, while impacted by China’s economic downturn, still contributed to the revenue rise. The company’s gross merchandise value in mini-programs, an industry metric for sales volume, rose by “high teens” year-on-year, exceeding 2 trillion yuan, as users turned to WeChat for a variety of services, from food orders to electric vehicle charging.
Fintech growth, however, showed signs of slowing, with revenue in this sector up only 2% as economic constraints weighed on consumer spending. In a significant development, Alibaba recently integrated Tencent’s WeChat Pay into its e-commerce platforms, which could benefit Tencent’s commercial payment services and boost its market share.
Despite fierce competition from ByteDance and pressure from a cooling economy, Tencent has maintained its position as a leader in gaming and digital services. WeChat, with 1.38 billion monthly active users, continues to serve as the company’s backbone, providing a vast ecosystem for social media, payments, and e-commerce. As Chinese authorities encourage corporate growth through recent stimulus measures, Tencent’s performance is seen as a bellwether for other tech giants like Alibaba and JD.com, which are set to report earnings later this week.
CNBC, the Wall Street Journal, and Bloomberg contributed to this report.
