Tencent, the Chinese games, social media and streaming giant, reported further quarterly profits recovery after a dire 2022. But its revenues for the April-June period missed financial analysts’ expectations and point to continued weakness in the Chinese economy.

Group revenues for the period were RMB149 billion ($20.6 billion), representing an 11% year-on-year growth, but a 1% quarter-on-quarter decline. For the first six months of the year revenues weighed in at RMB299 billion ($41.2 billion), compared with RMB269 billion at the 2022 interim stage.

Profitability was distinctly livelier – three-month net profits were RMB26.2 billion, compared with RMB18.6 billion in the same period last year and RMB25.8 billion ($3.61 billion) between January and March 2023 – but the gains came largely from unexciting things such as cost cutting and increased efficiency. They were achieved despite a doubling of profits tax payments and a RMB3 billion fine levied against its financial payments unit.

“During the second quarter of 2023, we sustained a solid revenue growth rate, along with a gravitation toward high quality revenue streams with better margins,” the company said Wednesday in a regulatory filing to the Hong Kong Stock Exchange.

Tencent operates one of China’s two biggest video streaming platforms and the country’s biggest music streamer and, with its huge Chinese games business, is the world’s largest games firm by revenue.

Tencent Video subscriptions decreased 5% year-on-year, but rebounded 2% quarter-on-quarter to finish at 115 million. The turnaround was helped by “original animated series and drama series,” the company said. Tencent Music, which reported on Tuesday, reached 100 million paying subscribers “as TME enriched offerings in terms of membership privileges and content.”

The Chinese video games business decreased by 9%, with revenues of RMB31.8 billion ($4.39 billion). That follows a previous year when government regulators held up the issue of licenses to exploit games commercially and also required platform operators to reduce games access to minor children.

“While our [Chinese] games revenue was flat year-on-year at RMB31.8 billion in the second quarter due to releasing less highly commercial content, we believe this was a temporary phenomenon, and that our [Chinese] games revenue should resume year-on-year growth in the third quarter of 2023,” Tencent said.

The international games business increased its revenues by 19% year-on-year to RMB12.7 billion ($1.75 billion). “We saw ongoing revenue growth from PC games, such as ‘Valorant,’ signs that the post-pandemic dip in activity is moving behind us in mobile games, notably ‘PUBG Mobile’; and positive contributions from recently-released games, including ‘Goddess of Victory: NIKKE’,” Tencent said.

The group still draws significant benefit from its WeChat/Weixin social media platform, which is nearly ubiquitous in China and has evolved into a super app – driving in-app games, short video consumption and commerce.

“Weixin user engagement increased healthily, benefitting from user time spent growth across video accounts, mini programs and moments. Video accounts total user time spent almost doubled year-on-year. Mini programs exceeded 1.1 billion monthly average users, including a notable contribution from mini games, which represent the leading casual games platform in China, and which generate distribution and advertising revenues with high margins and platform economics.”

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