Tencent Holdings Limited announced the unaudited consolidated results for the second quarter ended Jun 30, 2024

Tencent Holdings Limited (HKEX: 00700 (HKD Counter) and 80700 (RMB Counter), "Tencent" or the "Company"), a world-leading Internet and technology company in China, announced on Aug 14 the unaudited consolidated results for the second quarter ("2Q2024") ended Jun 30, 2024.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "Our second quarter 2024 results demonstrated the strengths of our platform plus content strategy. Our Domestic Games revenue resumed growth, and our International Games revenue accelerated growth, due to increased user engagement at several of our evergreen titles, and the successful launches of certain new games. Tencent Video achieved notable audience and subscriber growth with drama series developed from China Literature IP and produced internally. Looking forward, we continue to invest in our platforms and technologies including AI, enabling us to create new business value and better serve user needs."

2Q2024 Financial HighlightsRevenues: +8% YoY; gross profit: +21% YoY; non-IFRS[1] operating profit*: +27% YoY

• Total revenues were RMB161.1 billion (USD22.6 billion[2]), up 8% over the second quarter of 2023 ("YoY").

• Gross profit was RMB85.9 billion (USD12.1 billion), up 21% YoY.

• On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:

  • Operating profit* was RMB58.4 billion (USD8.2 billion), up 27% YoY. Operating margin* increased to 36% from 31% last year.

  • Profit for the period was RMB58.4 billion (USD8.2 billion), up 51% YoY.

  • Profit attributable to equity holders of the Company for the quarter was RMB57.3 billion (USD8.0 billion), up 53% YoY.

  • Basic earnings per share were RMB6.151. Diluted earnings per share were RMB6.014.

• On an IFRS basis:

  • Operating profit* was RMB50.7 billion (USD7.1 billion), up 40% YoY. Operating margin* increased to 31% from 24% last year.

  • Profit for the period was RMB48.4 billion (USD6.8 billion), up 79% YoY. 

  • Profit attributable to equity holders of the Company for the quarter was RMB47.6 billion (USD6.7 billion), up 82% YoY.

  • Basic earnings per share were RMB5.112. Diluted earnings per share were RMB4.994.

• Total cash was RMB415.2 billion (USD58.3 billion) and free cash flow was RMB40.4 billion (USD5.7 billion), +35% YoY. Net cash position totalled RMB71.8 billion (USD10.1 billion).

• Fair value of our shareholdings[3] in listed investee companies (excluding subsidiaries) totalled RMB564.5 billion (USD79.2 billion) and the carrying book value of our unlisted investments was RMB327.4 billion (USD45.9 billion). 

• During the second quarter of 2024, the Company repurchased approximately 103.7 million shares on the Hong Kong Stock Exchange for a consideration of approximately HKD37.5 billion. In addition, the Company paid approximately HKD31.7 billion for the final dividend in respect of the year ended 31 December 2023.

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1. Non-IFRS adjustments excludes share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets, impairment provisions/(reversals), SSV & CPP, income tax effects and others

2. Figures stated in USD are based on USD1 to RMB7.1268

3. Including those held via special purpose vehicles, on an attributable basis

* Since the fourth quarter of 2023, certain items have been reclassified from above to below the operating profit line. Historical comparative figures have been restated accordingly. Please refer to the earnings announcement for details.

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2Q24 Business Review and Outlook

• Video Accounts' total user time spent substantially increased year-on-year, as we enhanced recommendation algorithms and provided more local content. We are strengthening our transaction capabilities in a systematic way, in order to deliver seamless shopping experiences to users and drive sales for merchants.

  
  

• Mini Programs' total user time spent increased over 20% year-on-year, benefitting from their robust commerce and content ecosystem. GMV facilitated by Mini Programs grew at a double-digit percentage rate year-on-year. Total gross receipts of Mini Games increased over 30% year-on-year.

  
  

• We upgraded and rebranded Tencent Channels, a community-based platform which grew out of QQ, enabling moderators to manage their channels via customisable tools, and users to interact via text, image and live streaming. Users can now join Tencent Channels from Weixin and from game apps, as well as from QQ.

  
  

• Tencent Video released several popular drama series, driving long-form video subscriptions growth of 13% year-on-year to 117 million[4]. For example, "Joy of Life 2" and "The Legend of Shen Li" were the first and second most watched drama series on China online video platforms during the first half of 2024[5]. Both drama series were based on China Literature's web novel IPs, produced by New Classics Media, and broadcast on Tencent Video.

  
  

• Tencent Music strengthened cooperation with labels and artists, released original soundtracks for Tencent Video popular drama series, and provided live music experiences through offline events and concert tours. Music subscriptions increased 18% year-on-year to 117 million[6].

  
  

• We revitalised our flagship Domestic Games, Honour of Kings and Peacekeeper Elite, which each resumed year-on-year growth in gross receipts in the second quarter of 2024. Naruto Mobile reached a new milestone of 10 million monthly average DAU in May 2024. DnF Mobile, a newly released game, reactivated millions of IP fans and is retaining players well, positioning it to become our next evergreen major hit.

  
  

• Brawl Stars achieved a historical high quarterly average DAU and ranked third internationally among all mobile games measured by DAU[7], benefitting from frequent content updates and social features. The game's gross receipts grew more than tenfold year-on-year.

  
  

• We upgraded our advertising technology platform to analyse user interests over a longer time horizon and process signals more frequently, enabling us to gain deeper user insights and provide more relevant advertising recommendations.

  
  

• Leveraging our top-tier foundation model, Tencent Hunyuan, we released our AI assistant application, Yuanbao, to the public. Yuanbao possesses competitive strengths including accurate image understanding, advanced natural language processing, and AI search enhanced by our unique content ecosystem.

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4. The average daily number of subscriptions for the second quarter of 2024; year-on-year growth rate was calculated based on restated comparative figure

5. By video views across all online platforms in China for the first half of 2024, according to Enlightent.

6. The average number of subscriptions as of the last day of each month during the second quarter of 2024.

7. By average DAU in the second quarter of 2024, according to Sensor Tower

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2Q24 Management Discussion and Analysis

Revenues from VAS increased by 6% year-on-year to RMB78.8 billion for the second quarter of 2024. International Games revenues were RMB13.9 billion, up by 9% in both reported and constant currency terms, primarily driven by a strong performance from PUBG Mobile and enhanced popularity for Supercell's games. Gross receipts for International Games grew at a substantially faster rate than revenues. Domestic Games revenues resumed year-on-year growth, up by 9% to RMB34.6 billion, driven by increased revenue from VALORANT and the successful launch of DnF Mobile. Gross receipts growth for Domestic Games outpaced revenue growth. Social Networks revenues were RMB30.3 billion, up 2% year-on-year, supported by growth in music and long-form video subscription revenues, Mini Games platform service fees and app-based game virtual item sales, partially offset by a decline in music-related and games-related live streaming revenues.

Revenues from Online Advertising were RMB29.9 billion for the second quarter of 2024, up 19% year-on-year, primarily driven by increased revenues from Video Accounts and long-form video. Revenue from our mobile ad network declined year-on-year, due to reduced advertising budgets from certain Internet services companies.

Revenues from FinTech and Business Services increased by 4% year-on-year to RMB50.4 billion for the second quarter of 2024. FinTech Services revenue growth decelerated to a low single-digit percentage rate, impacted by further moderation in commercial payment revenue growth that reflected slow consumption spending, alongside a decline in consumer loan services revenue due to stronger risk control measures, while wealth management services revenues experienced double-digit percentage growth. Business Services revenues achieved a teens growth rate, driven by a rise in cloud services revenues, which included improved monetisation of WeCom, as well as higher eCommerce technology service fees within Video Accounts.