By Sherry Qin


Chinese technology giant Tencent reported a sharp rise in profit for the first quarter, buoyed by rapid growth in its high-margin businesses.

The Chinese videogame and social-media company said Tuesday that its net profit rose 62% to 41.89 billion yuan ($5.79 billion), higher than the CNY35.61 billion expected in a FactSet poll of analysts.

The Shenzhen-based company's gross profit margin expanded to 53% from 45% a year earlier, supported by high-margin businesses, such as short videos and mini games embedded in its super app WeChat. Its short videos saw its total user time grow 80% on year and gross receipts of mini games rise 30%.

Revenue for the period rose 6% from a year earlier, as solid ad revenue offset weakness in its gaming segment. Online ad revenue rose 26%, while domestic game sales fell 2% on year amid a lack of meaningful title releases during the period, improving slightly from the 3% decline in the fourth quarter.

"Several of our leading games in China and internationally started to benefit from team reorganizations we put in place... creating a foundation for our games revenue to resume growth in future quarters," the company said.

China's online-game industry has been in the spotlight amid a regulatory crackdown since 2021, but authorities have signaled a letup in recent months.

In a surprise move, China's gaming regulator in February approved a new batch of foreign video games, which analysts see as part of efforts to reverse a prolonged decline in the country's stock markets, as well as support a slowing economy.

Investors have welcomed the move, with the tech giant's Hong-Kong listed shares gaining 30% so far this year, outpacing the 12% growth of the benchmark Hang Seng Index.

Tencent is due to release its highly anticipated game title "Dungeon & Fighter Mobile" on May 21 in China. Citi analysts expect the game and a few other releases to help Tencent's domestic gaming revenue return to growth in the second quarter.

After announcing its plan to more than double its share repurchase in 2024, the company said it is "on track" to buy back over 100 billion Hong Kong dollars (US$12.80 billion) of its shares this year, as well as pay higher dividend.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

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