Zhongxin Finance, May 27 (Reporter Wu Tao) Recently, a number of Internet companies released their financial reports for the first quarter of 2022. Due to the decline in profits and losses, many companies' financial reports for this quarter were called "the most ugly financial reports".

However, the reporter noticed that many Internet companies have increased investment in research and development under such circumstances. What is this for?

Less profit, more loss-making companies

  The financial report shows that in the first quarter of 2022, Tencent’s revenue was 135.47 billion yuan, flat year-on-year; net profit was 25.55 billion yuan, down 23% year-on-year.

This is also the third consecutive quarter of Tencent's net profit decline.

Data map.

Photo by Wang Lei

  In the first quarter, Kuaishou’s revenue was 21 billion yuan, a year-on-year increase of 23.8%.

In terms of profits, although the loss narrowed, Kuaishou still lost 3.7 billion yuan in net loss this quarter.

  In the first quarter, NetEase's total revenue was 23.6 billion yuan, a year-on-year increase of 14.8%; net profit was 4.4 billion yuan, a year-on-year decrease of about 1% and a month-on-month decrease of 22.8%.

  In the first quarter, JD.com’s revenue was 239.7 billion yuan, a year-on-year increase of 17.95%; its net profit loss was 2.991 billion yuan, a year-on-year decrease of 182.69%.

  In the first quarter, Xiaomi’s revenue was 73.35 billion yuan, a year-on-year decrease of 4.6%; its net profit was a loss of 587 million yuan, and its adjusted net profit was 2.86 billion yuan, a year-on-year decrease of 52.9%.

  The reasons for the decline in profits or losses of Internet companies are not the same.

  For example, Tencent said in its earnings call analysis conference that the decline in advertising profits was due to the continued downturn in the advertising market, with advertisers in industries such as fast-moving consumer goods, e-commerce and travel sharply reducing advertising spending.

  In terms of Xiaomi, affected by the market environment, Xiaomi's global smartphone market shipments in the first quarter were 38.5 million units, down 22.1% from 49.4 million units in the first quarter of last year.

Wang Xiang, president of Xiaomi Group, said that the epidemic has affected Xiaomi's production, sales, logistics, and offline stores, and Xiaomi's costs and expenses have increased; in addition, consumers' willingness to consume is also insufficient.

Increase investment in R&D, even at a loss

  It is worth noting that in this case, Internet technology companies have chosen to increase their R&D efforts.

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

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

  In the first quarter, Xiaomi's R&D expenditure reached 3.5 billion yuan, a year-on-year increase of 16.0%.

Xiaomi said this was mainly due to increased salaries of R&D personnel and increased R&D expenses related to innovative businesses such as smart electric vehicles.

Among them, the cost of innovative businesses such as Xiaomi smart electric vehicles in the first quarter reached 425 million yuan.

Data map.

Photo by China News Service reporter Wu Tao

  Kuaishou’s R&D expenses have also soared, from 2.8 billion yuan in the first quarter of 2021 to 3.5 billion yuan in the first quarter of 2022.

According to its financial report, it is mainly due to expenses such as compensation and benefits due to the investment in big data and other advanced technologies to recruit additional R&D personnel.

  NetEase invested 3.4 billion yuan in research and development in the first quarter.

It is worth noting that NetEase has accelerated the development of the self-developed engine Messiah. Some analysts pointed out that the game engine is not only the underlying and core technology of the game, but also one of the key elements of the "metaverse" digital infrastructure.

  Although the increase in R&D investment of various companies is inconsistent, there are new businesses and advanced layouts, but in general, Internet technology companies should increase their R&D efforts even if they "tighten their belts".

For example, NetEase Youdao’s revenue in the first quarter was 1.2 billion yuan. Although it was still losing money, its R&D investment was as high as 200 million yuan, accounting for one-sixth of its revenue, a year-on-year increase of 59%.

  A recent research report released by Kaiyuan Securities pointed out that the platform economy will continue to play an important role in the process of economic and social development, especially for large Internet companies, whose performance in post-epidemic consumption recovery and close integration with the real economy will revise their performance. Innovation will also become an important engine for its long-term development.

Data map.

Photo by China News Agency reporter Yi Haifei

Income structure continues to change from virtual to real, the trend is obvious

  Although online advertisements and games are still the "profit cows" of many Internet companies, more and more Internet companies have an obvious trend of moving away from reality.

  Tencent said that the revenue structure continued to change from virtual to real. In the first quarter, the revenue of the financial technology and enterprise services sector, which represented the integration of digital and real, increased to 42.8 billion yuan in a single quarter, showing solid performance. A complete self-developed system including SaaS provides a technical base for serving the real economy.

  Xu Lei, CEO of Jingdong Group, also said after the release of Jingdong's financial report that as a new entity enterprise that insists on serving the real economy, Jingdong's business logic with the supply chain as the core is very clear.