Tencent Holdings (TCEHY) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 16, 2023 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Wendy Huang

Good day, and good evening. Thank you for standing by. Welcome to Tencent Holdings Limited 2023 Second Quarter Results Announcement Webinar. I'm Wendy Huang from Tencent IR team. At this time, all participants are in a listen-only mode. After the management's presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that today's webinar is being recorded.

Before we start the presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the group's financial performance prepared in accordance with IFRS. For a detailed discussion of risk factors and non-IFRS measures, please refer to our disclosure documents on the IR section of our website.

Let me introduce the management team on the call tonight. Our Chairman and CEO, Pony Ma will kick off with a short overview. President, Martin Lau; and Chief Strategy Officer, James Mitchell will provide a business review and update on our progress on some strategic growth drivers. Chief Financial Officer, John Lo, will conclude with financial discussion before we open the floor for questions.

I will now pass it to Pony.

Pony Ma

Okay. Thank you, Wendy. Good evening. Thank you, everyone for joining us. During the second quarter of 2023, we sustained a solid revenue growth rate, along with a gravitation to a higher-quality revenue streams with better margins. This transition combined with careful cost discipline developed in the previous years, resulted in profit growth exceeding revenue growth. We achieved notably rapid growth in advertising revenue, benefitting from deploying machine learning on our advertising platform and from Video Accounts monetization.

Now let me go through the headline financial numbers for the quarter. Total revenue was RMB149 billion, up 11% year-on-year or down 1% quarter-on-quarter. Gross profit was RMB71 billion, up 22% year-on-year and 4% quarter-on-quarter. Non-IFRS operating profit was RMB50 billion, up 37% year-on-year and 4% quarter-on-quarter. Non-IFRS net profit attributable to equity holders was RMB38 billion, up 33% year-on-year and 15% quarter-on-quarter.

Turning to our key services. Our Communications and Social Networks combined MAU of Weixin and WeChat [indiscernible] year-on-year and quarter-on-quarter to 1.3 billion, with increased synergies among Video Accounts, Mini Programs and Moments. For Games, we released two high-quality PC games in China, our most important PC game launches since 2015. In generative AI, we are internally testing our own proprietary foundation model in different use cases, and are providing Tencent Cloud Model-as-a-Service solutions to facilitate the efficient deployment of open-source foundation models in multiple industry verticals.