Tencent, which is in the process of "shifting gears", continues to be under pressure.

  On May 18, Tencent’s first-quarter report was released. In the first quarter of this year, its revenue was 135.5 billion yuan, which was flat year-on-year. According to non-international accounting standards, its net profit was 25.55 billion yuan, a year-on-year decrease of 23%. It has declined for three consecutive quarters.

  From the perspective of business segments, the "value-added services" business remained stable at the same level as the same period last year, while the "online advertising" business fell by 18% year-on-year, and the "fintech and enterprise services" business revenue increased by 10% year-on-year to 42.8 billion yuan. Revenue has become the engine of Tencent's steady growth, which is a bright spot in the financial report.

  In terms of user data, as of the end of the first quarter of 2022, the number of combined monthly active accounts of WeChat and WeChat was 1.288 billion, a year-on-year increase of 3.8%, the number of monthly active accounts of QQ mobile terminals was 563 million, a year-on-year decrease of 7%; the number of Tencent paid value-added service accounts It was 239 million, a year-on-year increase of 5.9%.

  It is worth mentioning that during the period of performance pain, Tencent accelerated the integration of digital and real, increased investment in research and development, and upgraded from the pursuit of large-scale growth to the pursuit of high-quality growth.

In the first quarter, Tencent's R&D expenditure reached 15.38 billion yuan, a year-on-year increase of 36%, and it continued to consolidate the technical foundation for serving the real economy.

  Ma Huateng, chairman and CEO of Tencent, said that in the face of industry challenges, the company has implemented cost control measures and adjusted some non-core businesses, which will help achieve a more optimized cost structure in the future.

Looking forward to the future, the company will focus on key businesses and insist on innovation under various challenges and cyclical changes, and continue to create value for users, partners and the entire society.

  In the conference call after the financial report, Tencent executives said that they will take more balanced measures for investment. The adjustment of the JD. , and use the proceeds from the reduction to repurchase.

Tencent's investment strategy is still valid, and we will analyze more macro risks in the future and keep up with the latest trends.

"We will pay attention to risks and manage them effectively. We will make further reasonable investments. Considering the reduction of holdings will also bring better cash flow to the company."

  In addition, for the game sector that the market cares more about, Tencent executives said that the game version number is currently in a good state of approval, and there will be more positive signs in the future, and regulatory factors will promote the further development of the game industry.

First-quarter results were lower than expected

  Under the epidemic, Tencent's performance was also under greater pressure, which was lower than outside expectations.

  According to the data, the revenue of 135.5 billion yuan in the first quarter increased almost zero year-on-year. According to non-international accounting standards, the net profit was 25.55 billion yuan, a year-on-year decrease of 23%. If you look at the profits attributable to Tencent's equity holders, then The decline was even greater, with a net profit of 23.4 billion yuan, a year-on-year decrease of 51%, which was directly "halved".

  Let’s compare the forecast data of Tencent’s first quarterly report by brokers:

  CITIC Securities: Tencent's short-term performance will not change its core value under pressure.

It is predicted that the company will achieve revenue of 142.7 billion yuan in the first quarter (up 5.5% year-on-year) and non-IFRS net profit of 26.8 billion yuan (down 19% year-on-year).

  Guosen Securities: Tencent is expected to achieve revenue of 140.5 billion yuan in the first quarter, a year-on-year increase of 3.8%, and its net profit under Non-IFRS decreased by 17.5% year-on-year to 27.3 billion yuan.

  CICC: It is predicted that Tencent's revenue in the first quarter will be basically flat to 135.9 billion yuan year-on-year, and its adjusted net profit will drop by 17% year-on-year to 27.3 billion yuan.

  China Merchants Securities: It is expected that Tencent's revenue in the first quarter of 2022 is expected to reach 138.584 billion yuan, and its adjusted net profit is expected to reach 28.133 billion yuan.

  Shenwan Hongyuan (Hong Kong) expects Tencent Holdings to achieve revenue of 14 billion yuan in the first quarter, a year-on-year increase of 4%, and a net profit of 28.2 billion yuan, a year-on-year decrease of 15%.

  It can be said that compared with the expectations of these top brokers, Tencent's revenue or net profit are lower than outside expectations.

Tencent also explained the decline in net profit in the financial report because the overall increase in costs and expenses was faster than revenue, and the net contribution from associates changed from profit to loss.

The digital economy has become a new engine

  Looking at the specific business situation, advertising revenue has declined significantly, game revenue growth has been sluggish, and the financial technology and enterprise service business has achieved rapid growth, which has become a new support for performance.

  In terms of business segments, the revenue of value-added services including games and videos was 72.74 billion yuan, accounting for 54% of the total revenue; the revenue of online advertising was 17.99 billion yuan, accounting for 13%, and the financial technology and enterprise services segment The income was 42.77 billion yuan, accounting for 32%.

  The specific business lines are as follows:

  Domestic games: revenue of 33 billion yuan, a year-on-year increase of 1%

  Overseas games: revenue of 10.6 billion yuan, a year-on-year increase of 4%

  Social network: revenue of 29.1 billion yuan, up 1% year-on-year

  Social advertising: revenue of 15.7 billion yuan, down 15% year-on-year

  Media advertising: revenue of 2.3 billion yuan, down 30% year-on-year

  Fintech and corporate services: revenue of 42.8 billion yuan, up 10% year-on-year

  It is understood that since Tencent's "930 Revolution" in 2018, its continuous deepening of the industrial Internet is showing results: the proportion of revenue from the financial technology and enterprise services sectors has risen from 25.5% in the first quarter of 2019 to 32% disclosed in the first quarter. Not only has the overall income health improved, but also serving the real economy has contributed to Tencent's new engine for high-quality development.

  The financial report explained that despite the impact of the epidemic, the amount of commercial payment transactions and corporate service revenue decreased in March this year, but Tencent adopted certain cost control measures, including repositioning its IaaS services, from simply pursuing revenue growth to achieving healthy growth, And actively reduce onerous contracts.

  In terms of games, in the first quarter, Tencent's game revenue in the local market fell by 1% to 33 billion yuan.

Among them, the revenue growth of recently launched games such as "League of Legends Mobile Games" and "Golden Shovel Battle" was mostly offset by the decline in revenue from games such as "The End of the World" and "Call of Duty Mobile Games".

  In the international market, Tencent's game revenue increased by 4% to 10.6 billion yuan, of which "VALORANT" and "Clash of Clans" and other game revenue increased, but "PUBG Mobile" revenue declined.

Tencent explained that during the epidemic prevention and control period, the game industry is still in a downward trend.

  In the value-added services business, social network revenue increased by 1% to RMB 29.1 billion, reflecting the increase in revenue from live video account services, but mostly offset by the decrease in revenue from music live streaming and game live streaming.

  At the same time, the revenue of the online advertising business in the first quarter fell 18% year-on-year to 18 billion yuan.

Tencent explained that this was due to weak advertising demand in industries such as education, Internet services and e-commerce, as well as the impact of regulatory changes in the online advertising industry itself, but advertising spending in the fast-moving consumer goods industry remained stable.

  Among them, social and other advertising revenue decreased by 15% to 15.7 billion yuan, mainly due to the impact of Tencent Mobile Advertising Alliance advertising business adjustment and supervision, revenue decreased significantly, and media advertising revenue decreased by 30% to 2.3 billion yuan.

Increase investment in R&D

  It is worth noting that Tencent increased its R&D investment in this quarter.

In the first quarter of 2022, Tencent's R&D investment maintained a year-on-year increase of 36%, reaching 15.38 billion yuan.

  Tencent believes that the core competitiveness of technology companies is products and technologies. Although they are in a transition period, their investment in research and development continues to increase, and the underlying capabilities of service entities are constantly being improved.

In addition, the R&D investment in the first quarter of 2022 is 15.38 billion yuan.

Since 2019, its cumulative investment in research and development has reached 136.5 billion yuan.

  At present, Tencent has established a complete self-developed system including servers, operating systems, chips, SaaS, etc., providing a solid technical foundation for serving the real economy.

  As of April 2022, Tencent has published more than 56,000 patent applications in major countries and regions around the world, and more than 26,000 patents have been authorized, of which invention patents account for more than 90%.

  A few days ago, Ma Huateng admitted in Tencent's sustainable social value report that Tencent is facing a new stage of coexistence of challenges and development: on the one hand, the growth rate of revenue and profits has slowed down; on the other hand, Tencent also believes that it can change gears. to create higher quality development.

  Tencent said in the financial report, "Looking ahead, we will focus on key businesses and insist on innovation under various challenges and cyclical changes, and continue to create value for users, partners and the entire society."

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