Tencent Holdings' shares experienced a triumphant surge today.
On a rather gloomy Thursday for the stock market, Tencent Holdings (TCEHY dropped by 1.44%) managed to shine a bit. Investors showed interest in the Chinese company following its latest news, which resulted in a more than 3% increase in its shares at the market close. This was quite contrasting to the 0.6% dip experienced by the S&P 500 index that day.
A significant boost to the bottom line
Tencent disclosed its third-quarter results after market hours on Wednesday. The company managed to increase its revenue by 8% year over year, reaching over 167 billion yuan ($23.1 billion). According to International Financial Reporting Standards (IFRS), net income saw a more impressive surge, rising by 47% to 53.2 billion yuan ($7.4 billion).
The social media and gaming specialist almost met the expected analyst estimate for revenue. However, it exceeded the bottom line, as the aggregate predictions by analysts following the stock were only 52.9 billion yuan ($7.3 billion) for that specific section.
Tencent's revenue growth was primarily supported by a 14% increase in income from its domestic gaming business, which amounted to more than 37 billion yuan ($5.1 billion). This was particularly noteworthy given that the unit recorded only 9% growth the previous quarter and posted year-over-year declines in the two frames before that. The launch of a popular new title, Black Myth: Wukong, significantly contributed to this growth.
Significant investments yet to yield results
On a downside, Tencent revealed that its substantial investments into artificial intelligence (AI) have yet to produce substantial returns. The revenue generated from these investments is insignificant, and it might take several quarters before they significantly enhance earnings.
In conclusion, it was a good quarter for the company, despite the relatively slow pace of the domestic economy – which has adversely affected other business sectors. The slow progress in AI investments might become a matter of concern if they don't gather pace soon. Investors should keep a close eye on this in the forthcoming months.
Given Tencent's impressive third-quarter financial results, the company's investors continue to show confidence in its future prospects by investing more money in its stocks. The significant boost to Tencent's bottom line, with a 47% increase in net income, has bolstered faith in the company's financial management and growth potential in the finance sector.
