Tencent Q4 Sales Rise 11% as Capex Nearly Quadruples amid AI Spending Boom

TMTPOST -- Tencent Holdings Ltd. on Wednesday posted stronger-than-expected sales, fueled by solid online gaming and artificial intelligence (AI)-powered advertising, as the Chinese social media and video game giant ramps up spending to ride the AI wave.

Credit：The Paper

Tencent reported total revenue of RMB172.4 billion (US$23.9 billion) for the quarter ended December 31, ahead of analysts' estimated RMB168.9 billion. The top line rose 11% year-over-year (YoY), accelerating from a 8% increase three months ago.The bottom also picked up speed for the fourth quarter. On an IFRS basis, the profit attributable to equity holders of the company, or net income, jumped 90% YoY to RMB51.3 billion after a 47% YoY rise for the previous quarter. That beat analysts’ projection of RMB 46.03 billion. Diluted earnings per share (EPS) were RMB5.49 with a 95% YoY increase, compared with a gain of 50.4% for the third quarter. On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items, the net income popped 30% YoY to RMB55.3 billion after a 33% increase.

For the full year 2024, revenue added 8% YoY to RMB660.6 billion. The net income on an IFRS basis climbed 68% to RMB194.1 billion, and the non-IFRS net income came in at RMB222.7 billion, up 41% YoY.

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Tencent’s top business gaming maintained solid performance after resuming positive growth April to June. For the December quarter,VAS (value-added services), including game and social network business, brought RMB79.0 billion with a 14% YoY rise. That was the first double-digit increase in revenue over the past year, following an increase of 9% for the preceding quarter.

Revenue from International Games grew 15% YoY to the new record of RMB16.0 billion for the December quarter after the business overseas delivered a 9% YoY increase in sales. Acceleration of International Games was driven by robust performances from Brawl Stars and PUBG MOBILE, alongside the early access release of Path of Exile 2. Domestic Games generated RMB33.2 billion. The revenue growth also accelerated to 23% after a 14% YoY increase for the June quarter. Domestic revenue benefited from a low base in the prior year’s period, sales growth from major games such as Honour of Kings, Peacekeeper Elite and VALORANT; and contributions from recently released games DnF Mobile and Delta Force, Tencent said.

Social Networks revenues rose 6% YoY to RMB29.8 billion, primarily due to growth in app-based game virtual item sales, music subion revenues and Mini Games platform service fees. Revenue from that division was also stronger than the third quarter when Tecent recorded a 4% YoY increase.

Marketing Services delivered a steady growth. Revenues from the division were RMB35.0 billion for the fourth quarter, up 17% YoY, the same increase as three months ago. That was driven by robust advertiser demand for Video Accounts, Mini Programs and Weixin Search inventories. Tencent said advertising spending rose across most major categories during the December quarter.

Revenues from FinTech and Business Services climbed 3% YoY to RMB56.1 billion, compared with a 2% YoY increase for the third quarter. The revenue growth reflected higher revenues from wealth management services and consumer loan services, while commercial payment services revenue was broadly stable YoY. Higher Business Services revenues were driven by growth in eCommerce technology service fees and WeCom revenue.

“Benefitting from AI-powered enhancements to our advertising platform, higher engagement in Video Accounts, and growth in our evergreen games, we achieved double digit revenue growth while sustaining continued operating leverage in the fourth quarter of 2024,” said Tencent CEO Ma Huateng, or Pony Ma, in a statement Wednesday.