Tencent Signals Gradual China Recovery After Gaming Arm Revives
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(Bloomberg) -- Tencent Holdings Ltd. described tentative signs of a Chinese economic bounce-back after Beijing unveiled a plethora of stimulus measures, addressing investors’ fears about the trajectory of the world’s No. 2 economy.
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President Martin Lau said payment transactions ticked up in October, reversing months of decline, after the government in September trotted out myriad policies to revive consumer confidence. But he cautioned that the various steps will take time to implement, suggesting a recovery won’t be immediate.
Lau delivered that outlook after Tencent posted a better-than-anticipated 47% surge in profit for the September quarter, when the summer release of Dungeon & Fighter Mobile helped China’s most valuable company cope with the downturn. The social media and entertainment leader posted net income of 53.2 billion yuan ($7.4 billion) for the period, surpassing the average projection by about 17%. Revenue rose 8% to 167.2 billion yuan, broadly in line with estimates.
The performance may help shore up expectations Tencent will ultimately prove more resilient to Chinese economic malaise than rivals Alibaba Group Holding Ltd. and JD.com Inc., which are grappling with shell-shocked shoppers. Shares in Prosus NV, a major Tencent stockholder, stood largely unchanged in Europe.
“The economic recovery would take some time,” Lau told analysts on a conference call. “But over the long run, we do believe it would definitely be re-accelerating because we felt there’s a very strong resolution by the government to revive the economy.”
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Tencent kicks off a closely watched earnings season for major Chinese tech companies, just as Beijing’s government unleashes a basket of policy stimulus from rate cuts to debt swaps to reflate the economy.
Its ubiquitous WeChat reflects the economic environment via online services from ride-hailing to meal delivery for a billion-plus users. In the September quarter, the fintech division that incorporates that payments network racked up its slowest growth since the Covid-era depths of 2022.
But in other respects, Tencent’s business is rounding a corner. The world’s biggest games publisher scored this year with the Nexon Co.-produced Dungeon & Fighter Mobile, which is fueling a much-needed turnaround in its core division. Tencent also backed the record-smashing PC hit Black Myth: Wukong, reinforcing its reputation as an industry financier. Those breakout hits helped anchor an unusually popular lineup of games during the summer months, when rivals from NetEase Inc. to Mihoyo also celebrated new hit titles.