Performance Flash | Tencent's Q3 gross profit increased by 16%, and the revenue of domestic games has significantly rebounded.

On November 13, Tencent announced its unaudited consolidated results for the third quarter ended September 30, 2024.

The total revenue for Q3 was RMB 167.2 billion (US$ 23.9 billion), representing an 8% year-on-year growth. The gross profit was RMB 88.8 billion (US$ 12.7 billion), showing a 16% year-on-year increase.

Under non-IFRS, the operating profit was RMB 61.3 billion (US$ 8.7 billion), with a 19% year-on-year growth; the operating profit margin increased from 33% in the same period last year to 37%. The profit for the period was RMB 60.9 billion (US$ 8.7 billion), representing a 33% year-on-year growth. The profit attributable to equity holders of the Company for the period was RMB 59.8 billion (US$ 8.5 billion), with a 33% year-on-year growth. Basic earnings per share were RMB 6.475, and diluted earnings per share were RMB 6.340.

The total cash was RMB 425.5 billion (US$ 60.7 billion). The free cash flow was RMB 58.5 billion (US$ 8.3 billion), with a 14% year-on-year growth. The net cash was RMB 95.5 billion (US$ 13.6 billion).

Image Source: Screenshot of Tencent's financial report

The revenue of Value-added Services business in the third quarter of 2024 increased by 9% year-on-year to RMB 82.7 billion.

The international market game revenue was RMB 14.5 billion, with a 9% year-on-year growth (or 11% growth in constant currency terms), due to the strong performance of games including PUBG MOBILE and Brawl Stars.

The growth rate of international market game revenue significantly lags behind the total gross revenue growth rate, as the retention rate of some games has increased, and the company has accordingly extended the revenue deferral period.

The domestic market game revenue increased by 14% year-on-year to RMB 37.3 billion, driven by games including VALORANT, Honor of Kings, Peacekeeper Elite, and Dungeon & Fighter: Origins.

The social network revenue increased by 4% year-on-year to RMB 30.9 billion, benefiting from the growth in virtual item sales for mobile games, music subscription member revenue, and small game platform service fees, partially offset by the decline in music live streaming and game live streaming service revenue.

The revenue of the marketing services business in this quarter increased by 17% year-on-year to RMB 30 billion, thanks to the strong demand from advertisers for video accounts, mini-programs, and WeChat Search advertising inventory, as well as a small contribution from Paris Olympics-related brand advertising.

The advertising expenditure in the gaming and e-commerce industries increased year-on-year, exceeding the reduction in expenditure in the real estate and food and beverage industries.

The revenue of the Financial Technology and Enterprise Services business increased by 2% year-on-year to RMB 53.1 billion. The overall revenue of Financial Technology services remained basically stable compared to the same period last year. Among them, the revenue of wealth management services increased year-on-year due to the expansion of the user scale and the growth of customer asset holdings, while the payment service revenue decreased due to weak consumer spending. The revenue of the enterprise services business increased year-on-year due to the growth of cloud service revenue and merchant technical service fees.

Among several key businesses, the transaction volume of mini-programs in this quarter exceeded RMB 2 trillion, with a double-digit year-on-year growth, benefiting from better coverage and optimized solutions in application scenarios such as food ordering, electric vehicle charging, and medical services.

The QQ team comprehensively upgraded the platform's backend infrastructure, driving the number of monthly active accounts on the QQ mobile terminal to return to positive year-on-year growth in this quarter.

The number of music subscription members increased by 16% year-on-year to 119 million, thanks to the optimization of the recommendation algorithm, content expansion, and sound quality improvement.

The number of long-video subscription members increased by 6% year-on-year to 116 million, thanks to popular animation and drama content.

The domestic market's flagship long-standing games Honor of Kings and Peacekeeper Elite achieved a healthy year-on-year growth in gross revenue. The quarterly average daily active user accounts of other long-standing games, Naruto Mobile and VALORANT, reached new highs. Tencent's first multi-terminal first-person shooter game, Delta Force: Xtreme, achieved a high average daily usage time and retention rate for users.

In the international market, VALORANT expanded from the personal computer to PlayStation and Xbox, and launched console versions in five key international markets, driving the game's gross revenue to increase by more than 30% year-on-year in this quarter.

The upgraded basic model of Tencent Hunyuan Turbo using the Heterogeneous Mixture of Experts (MoE) architecture has doubled the training and inference efficiency and halved the inference cost compared to the previous-generation model Tencent Hunyuan Pro.