Tencent’s Q1 revenue increased 11% year-on-year to 150 billion yuan. Ma Huateng: Artificial intelligence will become a multiplier for business development

Produced by Sohu Technology

Author | Pan Yuanyuan

On May 17, Tencent released its first quarter report, which showed that the company’s first-quarter revenue was 149.99 billion yuan, a year-on-year increase of 11%; net profit was 28.54 billion yuan, a year-on-year increase of 10%. Net profit under non-IFRS was 32.54 billion yuan, a year-on-year increase of 27%.

Ma Huateng said that Tencent’s total revenue has achieved steady growth, which reflects that the company’s revenue structure has been improved and operating efficiency has been improved. The company is investing heavily in building artificial intelligence capabilities and cloud infrastructure to embrace the opportunities brought by the basic model. We believe that artificial intelligence will become a multiplier for the company's business development and better serve our users, customers and even the entire society.

It is worth mentioning that Tencent’s net profit has resumed growth in the last quarter, but its main business income is still under pressure. In this quarter, Tencent's three main businesses recovered, all showing varying degrees of growth.

The three main businesses recovered, and the game growth rate reached 25%

Financial report shows that Tencent’s value-added service revenue in the first quarter was 79.337 billion yuan, a year-on-year increase of 9%. Among them, game revenue in the international market was 13.2 billion yuan, a year-on-year increase of 25%; game revenue in the local market was 35.1 billion yuan, a year-on-year increase of 6%.

With Tencent’s game revenue growing significantly, Tencent has obtained more than 15 game licenses in the local market this year. On May 15, Tencent’s game conference announced 35 new game products that will be launched soon. This year Tencent launched a new game "Dawn Awakening: Life", and the old game "Honor of Kings" launched nearly 60 new skins.

Its Q1 financial technology and enterprise services business revenue was 48.701 billion yuan, a year-on-year increase of 14%. It has now become Tencent’s largest growth engine in revenue. The financial report stated that Tencent’s payment business has helped the recovery of domestic consumption, and payment amounts have also benefited from it. The revenue of the enterprise services business turned positive year-on-year during the period, benefiting from the increase in sales of some cloud services and the first revenue generation from technical service fees related to the live streaming of video accounts.

In addition, Tencent’s Q1 social network revenue was 31 billion yuan, a year-on-year increase of 6%. The operating income of advertising business in the first quarter was 21 billion yuan, a year-on-year increase of 17%. Mainly due to the new revenue sources of video accounts, the increase in advertising in mini programs and the recovery of mobile advertising alliances.

The vitality of video accounts can also be seen from the advertising business. The financial report pointed out that the video account has attracted new advertisers and new budgets from existing advertisers, and the average eCPM (thousand page views) revenue of the video account is higher than other short video platforms. Tencent Chief Strategy Officer James Michel said at the post-earnings conference call that WeChat advertising contributes the most to the company’s advertising revenue, among which Moments advertising contributes the most; small programs and public accounts account for a relatively small share of advertising revenue, and the performance of video accounts It goes beyond mini programs and public accounts.

Tencent said that in terms of online advertising, it has upgraded its advertising machine learning platform and integrated deep learning models and standardized product libraries, thereby bringing advertisers better ad targeting capabilities and higher conversion rates.

In terms of digital content, affected by the postponement of content scheduling, the number of Tencent long video paid members fell by 9% year-on-year to 113 million, subscription revenue fell by 6% year-on-year, and music subscription revenue increased by 30% year-on-year.

In the field of scientific research, Tencent’s R&D expenditure reached 15.2 billion yuan this quarter. Since 2018, the company’s R&D investment has exceeded 220 billion yuan. As of the end of last year, Tencent had published more than 62,000 patent applications in major countries and regions around the world, and had granted more than 30,000 patents.

The decline in investment costs has brought about price reductions in cloud services. "I believe that every large company will have its own basic artificial intelligence model"

In the earnings call on the evening of May 17, Tencent executives responded to issues of common market concern such as cloud product price reductions, Hunyuan large model research and development progress, and large model supervision.

On May 16, Tencent Cloud announced price cuts for a number of core cloud products, with some product lines seeing price reductions of up to 40%.

In terms of cloud network, Tencent Cloud has reduced the LCU fee of load balancing CLB by 18% and the price of standard NAT gateway by 15%, benefiting cloud users at lower prices.

In terms of databases, Tencent Cloud Database TDSQL-C serverless has launched a new resource package payment model. Compared with annual and monthly products of the same specifications, the regular price has dropped by up to 25%. The feature of serverless billing based on actual usage can help users reduce the maximum price. Ben 80%.

In terms of cloud security, Tencent Cloud Host Security Basic Edition will be free to small and medium-sized enterprises across the entire network, and will also open asset management and one-click physical examination capabilities for free.

In response to this price reduction, James Michel responded that the proportion of Tencent Cloud business in total revenue is only single digits and does not reach 10%. Price cuts have been widely announced across the industry in recent weeks, and these actually apply to long-term prepaid contracts, which are mainly available to small and medium-sized businesses rather than large enterprises. For the industry, cloud investment costs are declining, so the price reduction itself makes sense.

In addition, while major manufacturers are showing off their large model capabilities, Tencent’s “Hunyuan” large model has yet to make any move. In this regard, Tencent President Liu Chiping said that the "Hunyuan" large model is making good progress. Specifically, in terms of data, on the one hand, it comes from Internet public data, and on the other hand, it is Tencent’s internal data. The latter has higher value than public data; in terms of model sequences, the amount of training is also increasing. "In terms of infrastructure construction, considering Tencent's cloud business, AI models will become our core advantage in the future." He said.

Liu Chiping also said that he believes that every large company will have its own basic artificial intelligence model, which will not only be used within the company, but will also be oriented to the market to provide services to users. In addition, some startups will try to build their own basic artificial intelligence models, which may be more suitable for a specific industry or category.

It is reported that Tencent is currently vigorously building artificial intelligence and cloud infrastructure, and has carried out large-scale self-research practices in core software and hardware fields such as chips, operating systems, and databases. The self-researched computing power base has begun to take shape.

In addition, regarding the issue of large model supervision, Liu Chiping made it clear that "supervision is necessary" and "this is not just for China, but also for the whole world. The founder of Open AI has gone to the U.S. Congress to testify. He feels There should be relevant industry supervision." With a reasonable regulatory framework in place and the government supporting innovation, the industry will definitely usher in opportunities for healthy growth.

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