Tencent Q4 Earnings Overview
Tencent reported Q4 financial results after the Hong Kong close and before the US open overnight. Goldilocks would say that the results were “not too hot and not too cold.” Ultimately, advertising revenue increased +15% year-over-year (YoY) in Q4 year over year compared to a -7% decrease in 2022 from 2021. We knew that Q4 was not going to be good as COVID spread across China following the elimination of the zero COVID policy. Markets are forward-looking, so the pickup in Q4 likely means another pickup in Q1, Q2, etc. In fact, during the conference call, the company said that January and February were showing “positive signs” of a sustained recovery. Tencent’s main performance drivers are video games and its WeChat social media platform, which is up to 1.3 billion users globally. While international games saw gains, domestic games were off. Management slashed sales and marketing expenses by -47% YoY in Q4 from RMB 11.6 billion to RMB 6.1 billion, compared to a -28% decrease in 2022 versus 2021. Research and development and general/administrative expenses did increase in both Q4 and 2022. Overall, I would say that there is a light on the horizon!
- Revenue increased +0.5% to RMB 144.954 billion (US $20.8 billion) versus analyst expectations of RMB 144.5 billion and Q4 2021’s RMB 144.188 billion.
- Adjusted Net Income increased to RMB 29.711 billion versus analyst expectations of RMB 30.843 billion and Q4 2022’s 24.88 billion.
- Adjusted EPS was RMB 3.042 versus analyst expectations of RMB 3.178.
Key News
Asian equities were higher overnight on light volumes, while Indonesia was off for the Nyepi holiday, which is a day of silence, fasting, and meditation.
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