Tencent Achieves 41% Profit Surge in Q2 Through AI-Powered Advertisements

18 Aug, 2023

Tencent Achieves 41% Profit Surge in Q2 Through AI-Powered Advertisements

Tencent Holdings, the prominent Chinese entity renowned for its social media presence and video games, has achieved a remarkable growth of more than 40% in net profit during the second quarter. This surge in profit is attributed to the company's strategic expansion of its advertising sector through the integration of artificial intelligence.

According to the latest quarterly report, net profit soared by an impressive 41%, reaching CNY 26.2 billion (equivalent to USD 3.6 billion) for the three-month period ending in June, In Comparison to the analogous timeframe from the preceding year. Concurrently, revenue experienced an 11% increase, reaching CNY 149.2 billion (equivalent to USD 20.5 billion).

Tencent strategically shifted its focus towards revenue streams characterized by superior margins and quality, marking a transition that, combined with disciplined cost management from the previous year, resulted in profit growth outpacing revenue growth. The company's advertising sector witnessed rapid expansion as it harnessed the potential of machine learning on its platform, effectively capitalizing on platforms similar to TikTok.

Although specific earnings projections were not disclosed, the company's outlook largely hinges on advancements in artificial intelligence. Tencent is currently engaged in internal tests of a foundational AI model across various sectors, encompassing gaming, advertising, cloud services, and fintech. Described as one of China's leading foundational AI models, this technology is anticipated to be officially launched later this year, as confirmed by Martin Lau, the president of Tencent.

During the second quarter, revenue generated from value-added services experienced a 4% increase, amounting to CNY 74.2 billion, contributing nearly half of the total revenue despite its gradual growth. Income from social networks inched up by 2%, reaching CNY 30 billion, largely driven by the popularity of mini-games and music subscriptions. However, revenues from game and music streaming experienced a decline. The user base of WeChat expanded to 1.3 billion monthly active users, thanks to synergies established between video accounts, mini-programs, and the Moments feature, analogous to Instagram Stories.

Further bolstering growth, international games experienced a 19% surge in revenue, reaching CNY 12.7 billion, propelled by the success of hit titles like Valorant, Triple Match 3D, and Goddess of Victory: Nikke. Meanwhile, domestic games maintained a stable revenue of CNY 31.8 billion.

A particularly notable highlight was the online advertising segment, which witnessed a substantial 34% rise in revenue, reaching CNY 25 billion. This growth was fueled by the escalating demand for video advertisements and the enhanced efficiency facilitated by machine learning.

Fintech and business services also experienced considerable growth, with revenue expanding by 15% to reach CNY 48.6 billion. This growth was driven by the surge in payments, supported by the increasing prevalence of live-streaming e-commerce transactions, coupled with the expanding cloud service sector.