Tencent - Promising and rebound in sight

Post-COVID and crackdown, Tencent's results has been the most promising among its China tech peers.

Here are some key points to take note of their results.

YoY and QoQ wise, Q1'23 results trumped over Q1'22 results and even Q4'22.

Revenue for social networks was up 6% YoY, reflecting growth of in-game item sales and music subscription revenue.

Domestic games also grew 6% YoY due to growth in HoK, DnF, CrossFire, and Arena Breakout.

Valorant, the go-to shooter game right now, has pulled up International Games revenue by 25% together with NIKKE and Triple Match 3D.

Gross margins stayed or grew together with the revenue revival.

Overall gross margins grew by 290 bps QoQ. This is mainly driven by better gross margins from VAS, FinTech and Business Services, albeit offset by a minor dip from Online Advertising.

The worst is mostly over now for Tencent as its operating margin breached 30% to hit 32.3% in Q1'23,

Net margin also showed a rebound to achieve 22.3%.

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