After the Hong Kong Stock Exchange closed on Wednesday, Tencent Holdings released its latest financial report: it achieved revenue of 161.12 billion yuan in the second quarter, an increase of 8% year-on-year; its net profit increased by 82% year-on-year to 47.63 billion yuan; and its Non-IFRS operating profit increased by 27% year-on-year.

In the second quarter, Tencent's gaming business rebounded strongly, reversing the previous sluggish trend of domestic gaming business, and international gaming business also achieved accelerated growth. Both "Honor of Kings" and "Peace Elite" resumed year-on-year growth in revenue. The average daily active users for "PUBG Mobile" hit a historic high.

In the later conference call, Tencent said that its fintech and gaming businesses would continue to drive sustained profit growth.

Tencent said it is bullish on the high user retention rates of new games such as "Dungeon Fighter Online Mobile," believing that this is a key factor in sustained growth. "Honour of Kings" has become China's largest PC game, and Tencent plans to expand it to mobile platforms. Meanwhile, Tencent is negotiating with Apple for a fair and sustainable revenue-sharing solution for its iOS mini-games to improve user experience and developer revenue. Currently, iOS mini-games cannot monetize through in-app purchases. The outcome of the negotiations will affect future revenue.

Regarding cloud computing services, Tencent said that there is a very rapid growth in customers' demand for renting GPUs to meet their own AI needs. Although the Chinese market is currently smaller than the US market, demand is steadily increasing. Tencent believes that with more encouraging government policies and innovative environments in the Chinese market, AI-related businesses will have greater development opportunities. The company will continue to increase AI investments and actively explore integrating AI technology into its games and digital content products to promote business growth.

Although the fintech business has been affected by weak consumer spending, Tencent said it would continue to respond to market changes by adjusting its lending policies and optimizing its wealth management services. The company is optimistic about the government's stimulus policies for consumption and expects that these policies will help boost consumer confidence, promote economic growth, and further boost Tencent's business.

The following is the Q&A translated in text:

Q1. "Dungeon Fighter Online Mobile" is not a typical tactical esports game like "Peace Elite." Considering the type and nature of this game, what are its strategy and sustainability prospects?

Tencent: Since "Dungeon Fighter Online Mobile" (DNF Mobile) went online, it has a very good user retention right to play. Of course, the retention rate fluctuates over time, but actually, the retention rate of the first 30 days of the game's life cycle has always been a very good indicator of which game can enjoy the longest life. Therefore, whether it is "League of Legends," "Tencent WeGame" or "Peace Elite," their outstanding performance in the first 30 days is not the number of downloaded users or the revenue they generate but the high retention rate among users who have installed and started playing the game. We have also seen very good retention rates, especially on the DNF mobile side.

Of course, because the development cycle of DNF mobile is exceptionally long, there is a very rich content pipeline that has been prepared for the next two to three years and will be gradually released. In the next two to three years, we will also work on the content pipeline for subsequent years. But the game is in an unusual situation because of its exceptionally long development pipeline, and now there is an exceptionally long post-release content pipeline that is ready to be released at any time. This is about DNF Mobile.

Q2. Regarding the fintech business: The growth rate of the fintech business was negatively affected by weakened consumption environment and consumer price sensitivity. Has Tencent observed any changes in consumer behavior in trading financial products on its platform? If so, are these changes structural or cyclical?

Tencent: As for fintech, if we analyze different businesses, the payment business is definitely closely related to consumption growth. As you can see in our official data, China's consumption growth is actually quite weak. We also see this in our payment business. We see that the number of transactions continues to increase, and the number of commercial transactions continues to increase by two digits. But on the other hand, the average transaction value has decreased, which is contrary to the average transaction value that we have seen consistently increase in the past.

So we think this is an obvious sign that consumers are becoming more budget-conscious, especially in payment. In terms of credit, we do see that consumers actually want to borrow more money at this time, but income has actually decreased because we proactively control the amount of lending. We lend because we hope to tighten credit at this time in a macro-environment and weak consumer spending. On the other hand, wealth management has actually increased because many consumers are saving more rather than consuming in uncertain times.

These are the dynamics happening in different product fields of CNI Xiangmi Lake fintech index. We believe this is more cyclical and related to the overall market's consumer patterns. Therefore, we see that the government has actually launched very positive policies to encourage consumption. We believe that with the introduction of these policies, consumer sentiment and the economy will begin to shift at some point. As demonstrated in wealth management services, it is not that people do not have money. People actually have money, but they choose to save rather than consume. If the government's policies can actually instill more confidence among consumers and begin to revitalize different parts of the economy, we believe that at some point, consumer sentiment will return, which will be good for our business.

Q3. Where does Tencent stand in the development cycle of 3A games? Some powerful IP generated by Chinese literature has played a considerable role in driving the growth of PC games, long videos and mobile games. It is obvious that "Honor of Kings" is highly anticipated in adopting IP, how is its progress going? Is it still turning other IPs into games? How much revenue potential can be generated in digital content?

Tencent: We have discussed some other IP-based games, and we are excited about this in earlier earnings calls and fourth quarter results calls. Many of our games have achieved tremendous success on the PC, such as "Cross Fire", which is now the largest PC game in China. Of course, we want to expand it to mobile. You can take a look, if you prefer, at some interesting IPs generated by Chinese literature, Tencent comics and creators, to see if IPs make sense for games too. That's the response to the second question. As for the first question, I'm not sure if there is a cycle in the development of 3A games itself.

Regarding the first question, I am not sure if there is a cycle in the development of 3A games itself.

....