Performance Bulletin | Tencent's Q4 performance exceeded expectations, with both revenue and gross profit achieving double-digit growth.

On March 19th, Tencent Holdings released its Q4 and full - year 2024 earnings report. In the fourth quarter, Tencent's revenue increased by 11% year - on - year to RMB 172.45 billion, higher than the market's estimated RMB 168.74 billion. For the whole of last year, Tencent's revenue increased by 8% year - on - year to RMB 660.3 billion.

In the fourth quarter, the gross profit increased by 17% year - on - year to RMB 90.7 billion, mainly due to the growth of high - gross - margin revenue sources such as domestic market games, Video Accounts, and WeChat Search, as well as the improved cost - effectiveness of cloud services. The gross profit margin increased from 50% in the same period last year to 53%. The cost of revenue increased by 5% year - on - year to RMB 81.7 billion, mainly due to the growth of content costs driven by the increase in game revenue, as well as the growth of bandwidth and server costs.

The earnings report mentioned that benefiting from the upgrade of the AI - empowered advertising platform, the increased user engagement of Video Accounts, and the growth of evergreen games, Tencent achieved double - digit revenue growth in the fourth quarter. A few months ago, Tencent reorganized its AI team to focus on rapid product innovation and in - depth model R & D, increased AI - related capital expenditures, and stepped up the R & D and marketing of native AI products.

"We believe that these increased investments will bring continuous returns by improving the efficiency of the advertising business and the lifecycle of games, and create more long - term value as our personal AI applications are more widely adopted and more enterprises use our AI services," the earnings report stated.

The revenue of the value - added services business in the fourth quarter increased by 14% year - on - year to RMB 79 billion. The international market game revenue was RMB 16 billion, a year - on - year increase of 15% (16% at constant exchange rates), due to the strong performance of "Brawl Stars" and "PUBG MOBILE" and the release of the early access version of "Path of Exile 2". The domestic market game revenue increased by 23% year - on - year to RMB 33.2 billion, benefiting from the low base effect in the same period last year; the increased revenue of major games such as "Honor of Kings", "Peacekeeper Elite", and "VALORANT"; and the revenue contribution of recently released games such as "Dungeon & Fighter: Origins" and "Delta Force".

The social network revenue increased by 6% year - on - year to RMB 29.8 billion, mainly due to the growth of mobile game virtual item sales, music paid membership revenue, and mini - game platform service fees.

The revenue of the marketing services business increased by 17% year - on - year to RMB 35 billion, benefiting from advertisers' strong demand for advertising inventory on Video Accounts, mini - programs, and WeChat Search. Advertising spending increased in most key industries this quarter.

The revenue of the financial technology and enterprise services business increased by 3% year - on - year to RMB 56.1 billion. The growth of financial technology service revenue was due to the increase in wealth management service and consumer loan service revenue, while the revenue of commercial payment services remained largely stable year - on - year. The growth of enterprise service revenue was due to the increase in merchant technology service fees and enterprise WeChat revenue.

Looking at the full - year performance, in 2024, the annual revenue of the value - added services business increased by 7% year - on - year to RMB 319.2 billion. The international market game revenue was RMB 58 billion, with an increase of 9% both as reported and at constant exchange rates, benefiting from the strong performance of "PUBG MOBILE" and Supercell games. The domestic market game revenue increased by 10% to RMB 139.7 billion, benefiting from the revenue growth of "VALORANT", "Naruto", "Teamfight Tactics Mobile", and "League of Legends: Wild Rift", as well as the new revenue contribution of "Dungeon & Fighter: Origins" and "Delta Force".

The earnings report mentioned that the number of Tencent's evergreen games increased from 12 in 2023 to 14 in 2024.

The social network revenue increased by 2% year - on - year to RMB 121.5 billion, benefiting from the growth of music and long - video paid membership service revenue, as well as the growth of mobile game virtual item sales and mini - game platform service fees, partially offset by the decline in music live - streaming and game live - streaming service revenue. The number of Tencent Video paid members reached 113 million. The number of Tencent Music paid members increased to 121 million.

The annual revenue of the marketing services business increased by 20% year - on - year to RMB 121.4 billion. This growth was mainly due to advertisers' strong demand for advertising inventory on Video Accounts, mini - programs, and WeChat Search, as well as Tencent's continuous upgrade of its AI - driven advertising technology platform. Advertising spending increased in most key industries, with significant increases in the game, e - commerce, education, and internet service industries.

The annual revenue of the financial technology and enterprise services business increased by 4% year - on - year to RMB 212 billion. The growth of financial technology service revenue mainly reflected the increase in wealth management service and commercial payment service revenue. The growth of enterprise service revenue was driven by the increase in enterprise WeChat revenue and merchant technology service fees.

The annual cost of revenue last year decreased by 2% year - on - year to RMB 311.1 billion, due to the reduction in live - streaming revenue sharing costs, long - video content costs, and cloud project deployment costs.

The annual gross profit increased by 19% year - on - year to RMB 349.2 billion, mainly due to the strong growth of high - gross - margin revenue sources such as domestic market games, Video Accounts, WeChat Search, and mini - game platforms. The improved profitability of Tencent's cloud service business and long - video business also contributed to the overall gross profit growth. The gross profit margin increased from 48% last year to 53%.

The gross profit of the value - added services business increased by 12% year - on - year to RMB 181.7 billion, benefiting from the growth of high - gross - margin revenue from domestic market games and mini - game platform service fees, as well as the increase in long - video paid membership revenue and content cost optimization. The gross profit margin increased from 54% last year to 57%.

The gross profit of the marketing services business increased by 31% year - on - year to RMB 67.2 billion, mainly due to the growth of high - gross - margin marketing service revenue from Video Accounts and WeChat Search. The gross profit margin increased from 51% last year to 55%.

The gross profit of the financial technology and enterprise services business increased by 24% year - on - year to RMB 99.7 billion, benefiting from the revenue growth of wealth management services and enterprise WeChat, the growth of merchant technology service fees, and the improved cost - effectiveness of cloud services. The gross profit margin increased from 40% last year to 47%.

The annual selling and marketing expenses last year increased by 6% year - on - year to RMB 36.4 billion, reflecting the increased promotion efforts to support the release of new content. The percentage of selling and marketing expenses to revenue remained basically stable at 6%, the same as last year. The general and administrative expenses increased by 9% year - on - year to RMB 112.7 billion. This growth was mainly due to the increase in R & D expenses (including those related to AI projects) and employee costs. The percentage of general and administrative expenses to revenue remained basically stable at 17%, the same as last year.