Chinese tech giant Tencent’s revenue accelerated in the first quarter as the world’s second-largest economy slowly recovered after China’s zero-Covid policy ended.
The social media and gaming group reported on Wednesday that revenue rose 11% year-on-year to 150 billion yuan ($21.8 billion) in the three months to March. Its net profit rose 10% to 25.8 billion yuan.
The turnaround comes after Tencent’s revenue fell 1 percent last year, the company’s first annual sales drop on record, hit by Beijing’s draconian zero-Covid policy that curtailed the group’s ubiquitous WeChat app. Advertising and spending on .
The growth of Douyin, TikTok’s Chinese sister app ByteDance’s rival, has also been taking ad spending away from WeChat. Tencent said online ad spending recovered, with first-quarter revenue up 17% year-on-year, as the group’s 1.3 billion WeChat users watched more and more clips in the app’s channel video streams.
“We estimate that Tencent’s ad revenue has been growing faster than ByteDance’s since around December,” said Bernstein analyst Robin Zhu, noting that channels accounted for the vast majority of ad growth.
The $420 billion company has also been reeling from Beijing’s campaign to rein in the power and influence of its sprawling tech conglomerate.
Over the past year, the conglomerate has slowed the pace of investing in emerging start-ups and started trimming its Chinese tech-holding empire, including stakes in e-commerce group JD.com and food delivery leader Meituan.
The use of WeChat Pay by shoppers and diners to checkout helped Tencent’s fintech unit’s revenue rise 14% year-on-year in the first quarter, accounting for about a third of the group’s total revenue.
Sell virtual armor and other in-game upgrades such as glory of the king and Triple Match 3D Contributing another third of revenue, sales at its domestic gaming business rose for the first time in about a year as Beijing lifted punitive restrictions on the industry.
But strict restrictions on the amount of time minors play games means that this category of users’ game time has dropped by 96% compared with the same period last year.
Chief Executive Ma Huateng said on Wednesday that the group is investing in the fast-growing field of generative artificial intelligence. “(We) expect AI to be a growth multiplier that enables us to better serve our users, customers and society at large,” he said.
The Shenzhen-based company has been one of the quietest of the Chinese group vying to replicate OpenAI’s recent advances in artificial intelligence. While rivals Baidu and Alibaba have advertised their plans with much fanfare and released early versions of their AI bots for testing, Tencent has been more cautious about its AI plans.
As of March 31, Tencent’s shareholding value in listed companies was 473 billion yuan, and the group’s book value of unlisted investment companies was 333 billion yuan.
Tencent said it spent 4 billion yuan to repurchase 12.5 million shares during the quarter.
Additional reporting by Eleanor Olcott in Hong Kong