After hours on May 18, Tencent Holdings (0700. HK) released its performance report for the first quarter of 2022. According to the financial report, in the first quarter of 2022, the company achieved a revenue of 135471 billion yuan (RMB, the same below), which remained stable compared with the same period last year. The net profit (non IFRS) was 25.545 billion yuan, a year-on-year decrease of 23%. Tencent said that the company’s net profit decreased year-on-year because the overall rise of costs and expenses was faster than income, and the net contribution made by associated companies changed from profit to loss.
Specifically, in terms of value-added service business, the revenue in the first quarter of 2022 was 72.7 billion yuan, which remained stable compared with the same period last year. Game revenue in the local market fell by 1% to 33 billion yuan. Tencent said in its announcement that it was due to the direct and indirect impact of juvenile protection measures on the number of active users and paying users. The total revenue of mobile game value-added services (including mobile game revenue attributable to its social network business) decreased by 3% year-on-year to 40.3 billion yuan, while the revenue of PC client games increased by 2% year-on-year to 12.1 billion yuan.
In the first quarter of 2022, the revenue of online advertising business decreased by 18% year-on-year to 18 billion yuan. Tencent said that this reflected the weak advertising demand in education, Internet services and e-commerce industries, as well as the impact of regulatory changes in the online advertising industry, which was partially offset by the stable demand of the fast consumer behavior industry and the advertising revenue brought by its merger Sogou. Social and other advertising revenue decreased by 15% to 15.7 billion yuan, mainly due to the significant decrease in revenue due to the company’s mobile advertising alliance advertising business adapting to the regulatory impact. On the other hand, the subscription list advertising in the official account drove its advertising revenue growth, partially offsetting the decline in advertising revenue of the alliance. Media advertising revenue decreased by 30% to 2.3 billion yuan, reflecting the decline in media advertising revenue such as Tencent News and Tencent video, which was partially offset by the advertising revenue of the 2022 Beijing Winter Olympic Games.
Affected by the epidemic, the revenue of fintech and enterprise service business in the first quarter of 2022 increased by 10% year-on-year to 42.8 billion yuan, and the year-on-year growth rate of revenue slowed down.
According to the financial report, the free cash flow of Tencent group was 15.2 billion yuan in the first quarter of 2022. The net cash flow from operating activities was 33.8 billion yuan, including 8.2 billion yuan for capital expenditure, 8.9 billion yuan for media content and 1.5 billion yuan for lease liabilities. As of March 31, 2022, the fair value of the company’s equity in listed investment companies (excluding subsidiaries) was 606 billion yuan.
Tencent said that the company’s net profit decreased year-on-year because the overall rise of costs and expenses was faster than income, and the net contribution made by associated companies changed from profit to loss. According to the financial report, the company recorded a loss of 6.3 billion yuan in the first quarter of 2022, compared with a profit of 1.3 billion yuan in the same period of 2021. In the first quarter of 2022, non international financial reporting standards accounted for a loss of 2.2 billion yuan for associates and joint ventures, compared with a profit of 500 million yuan in the same period last year, reflecting the normalization downward trend of overseas user activities and consumption after the epidemic, resulting in the decline of income of overseas associates in some game industries, the impact of JD group no longer being an associate, and the loss of associates in the field of transportation and travel services.
Tencent said that in the challenging first quarter of 2022, the company implemented cost control measures and adjusted some non core businesses to help it achieve a more optimized cost structure in the future. The company uses small programs, Tencent conferences, enterprise wechat and other tools to help Chinese enterprises and consumers overcome the difficulties in the new round of epidemic, and continues to invest in strategic growth fields, including enterprise software, video numbers and games in the international market. Looking forward to the future, the company will focus on key businesses under various challenges and periodic changes, adhere to innovation, and continue to create value for users, partners and the whole society.
