Shares of the Chinese technology company Tencent rose significantly today, with an early increase of up to 3.4%, before stabilizing at a 0.7% increase by 2:43 p.m. ET. Tencent, which is considered one of China’s premier technology firms, owns WeChat, a dominant social media platform with 1.39 billion users. The company is also a leading mobile game publisher, owns fintech leader TenPay, and operates major video and music streaming platforms in China. Additionally, Tencent ranks among China’s top cloud software companies and is developing an artificial intelligence large language model named HunYuan.
Tencent released impressive earnings today, surpassing expectations in both revenue and profit. Although the stock had already been climbing before the earnings announcement, its ongoing rise and reasonable valuation offer positive signs for investors.
In the fourth quarter, Tencent’s revenue climbed 11% to reach 172.4 billion renminbi, approximately $24 billion, with adjusted (non-IFRS) earnings per share at RMB5.909, or $0.82. These figures exceeded analyst predictions and represented an encouraging growth acceleration compared to the full year’s 8% increase. Despite a prolonged recession in China’s consumer economy over recent years, the latest quarter showed promising recovery in crucial segments for Tencent. This outcome suggests that government stimulus measures announced last summer, which are set to continue into 2025, may be beginning to yield results.
Domestic video game revenue for Tencent increased by 23% year-over-year, indicating a recovery in this vital area. Additionally, international gaming revenue experienced a solid growth of 16%. Marketing revenue, including digital advertising through WeChat and other platforms, rose 17%, with management highlighting increased spending across most major categories. The fintech and business services segment lagged with only a 3% growth, though Tencent reported modest gains across this area.
WeChat also saw a continued rise in user numbers, with a 0.2% quarter-over-quarter increase and a 3% year-over-year boost. Based on these strong results, Tencent’s management announced a 32% dividend increase and plans for ongoing share repurchases in 2025.
Despite an 87% rally in the past year, Tencent’s stock remains below its early 2021 peak. The company’s price-to-earnings (P/E) ratio stands at 24.5 based on full-year 2024 diluted earnings, but after accounting for Tencent’s substantial external investments, valued at roughly RMB905.4 billion ($126 billion) at year-end, its trailing P/E ratio drops to 19.7. This valuation remains relatively low compared to U.S. technology giants, which usually have trailing P/E ratios in the mid-20s to mid-30s or higher.
