Tencent Misses Revenue Forecasts In Q3, But Diversified Revenue Streams Lead to Higher Profits
Portfolio Pulse from Anusuya Lahiri
Tencent Holding Ltd (OTC:TCEHY) reported Q3 revenue of $21.5 billion, missing the $21.9 billion consensus. Despite this, non-IFRS operating profit rose 36% Y/Y to $7.7 billion, with margins increasing from 29% to 36%. Non-IFRS EPS was RMB4.657, against a consensus of $0.57. Revenue growth was seen across various segments, with VAS up 4% Y/Y, International Games up 14% Y/Y, Online Advertising up 20% Y/Y, and FinTech and Business Services up 16% Y/Y. Adjusted EBITDA increased by 26% Y/Y, and free cash flow surged 85% Y/Y. The company is focusing on high margin revenue streams and investing in AI. FY23 revenue and EPS consensus are $85.68 billion and $2.02, respectively. TCEHY shares closed up 2.06% at $40.68 on Tuesday.
November 15, 2023 | 1:05 pm
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Tencent's Q3 revenue missed estimates, but the company saw a significant increase in operating profit and margins. Diversified revenue streams and a focus on high margin activities, along with investments in AI, suggest a strong underlying business despite the revenue miss.
While the revenue miss might concern investors, the substantial increase in profits and margins, along with strategic investments in AI and new services, indicate a positive outlook for Tencent's future performance. The stock's rise post-earnings release suggests the market may be looking past the revenue miss and focusing on the company's profitability and growth prospects.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100