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Tencent Holdings Limited


Wall street consensus:


​Recent Conference Call

### Tencent Holdings Limited FQ4 2023 Earnings Call Summary

**Insightful Quote from CFO, Shek Hon Lo:**
"For quarter 4 2023, total revenue was CNY 155.2 billion, up 7% year-on-year. We have reclassified interest income from above to below the operating profit line... The reclassification aims to better reflect the results of day-to-day operations..."

**Key Quarterly Business Trends:**

1. **High-Quality Revenue Growth Model:**
Tencent has shifted towards a high-quality revenue growth model, emphasizing increased focus on capital allocation discipline. This strategic pivot aims to enhance shareholder value by leveraging Tencent's leading social and payment platforms, which have already covered their operational costs, thereby producing significantly higher incremental margins.

2. **Strategic Investments in AI and Technology Breakthroughs:**
Tencent reported significant technological advancements, particularly with its Tencent Hunyuan model, positioning it among the top tier of large language models in China. The enhancement in advertising AI models has enabled better ad targeting, contributing to higher revenue.

3. **Expansion in Gaming and International Markets:**
Tencent noted substantial progress in its gaming sector, with new major titles and international games contributing to revenue growth. Specifically, the company highlighted its efforts in revitalizing existing major games and launching new titles, which are expected to positively influence revenue trends in 2024.

**Critical Questions from Analysts:**

1. **Kenneth Fong (UBS) - Online Game Growth Strategy:**
- Question: Timing and impact of strategies on online game growth.
- Response: Tencent anticipates game revenue improvement from the second quarter of 2024 onwards, leveraging strategies focused on revamping flagship titles, building emerging franchises, and launching new titles.

2. **William Packer (Exane BNP) – Impact of Gaming Regulations:**
- Question: Potential impact of new draft rules on in-game monetization.
- Response: Management expressed reduced concern over regulations, highlighting supportive measures by regulators and adjusting game monetization strategies accordingly.

3. **Ronald Keung (Goldman Sachs) - Video Accounts & Shareholder Returns:**
- Question: Evolution of Video Accounts e-commerce and shareholder returns strategy.
- Response: Tencent aims to integrate Video Accounts with mini-programs and is committed to significant capital return to shareholders through increased dividends and share buybacks.

**Outlook or Guidance:**

Tencent forecasts continued organic growth with a focus on gross profit growth as a better proxy for performance. The company plans to leverage its AI advancements to enhance advertising revenue and continue developing major game hits. Additionally, Tencent intends to return significant capital to shareholders in 2024, further emphasizing its commitment to shareholder value.

Key Questions to follow

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