Tencent’s 2024 financial performance
Tencent’s 2024 Net Profit Grows 41%, Stock Price Surges 43% — Is the Valuation Still Cheap?
In 2024, Tencent’s net profit (non-IFRS profit attributable to equity holders) reached 222.7 billion yuan, a 41.2% year-on-year increase, hitting a record high!
At the same time, Tencent’s stock price rose from HKD 290.2 to HKD 417 at the close of December 31, 2024 — a 43.7% surge for the year!
With Tencent’s net profit growing 41.2% and its stock price surging 43.7%, is its valuation still cheap?
To answer this question, we need to carefully examine Tencent’s 2024 financial report.
- Key Financial Metrics Analysis
1.1 Profit Growth Far Outpaces Revenue Growth
Understanding Tencent’s various profit metrics is the first challenge in reading its financial reports. Each metric has pros and cons, and none can be directly used to calculate the actual P/E ratio.
If we want to observe the profit growth of Tencent’s actual business operations, operating profit is a good indicator — it was newly added in 2023.
Tencent’s 2024 revenue, gross profit, and operating profit grew by 8.4%, 19.15%, and 30%, respectively. The incremental growth indicates high operational efficiency.
1.2 Significant Gross Margin Expansion Across All Three Major Businesses
Tencent’s three major businesses in 2024 — Value-Added Services (VAS), Marketing Serivces, and Business Services — all saw revenue growth and margin expansion:
VAS (Games & Social Networks): Revenue up 9.9%, with domestic games growing 10% and international games up 9%.
Marketing Serivces: Revenue surged 20%, the fastest-growing segment.
Business Services: Revenue growth 12%, with gross margin improving by 7 percentage points.
Overall, Tencent’s gross margin rose from 48% to 53%, a very high level.
Tencent’s business model has another advantage: diversification. While its financial report divides operations into three segments, it effectively operates five distinct businesses:
Games
Social Networks
Online Advertising
FinTech
Enterprise Services
Each business has balanced revenue contributions and different profitability levels. Tencent is never short of traffic, and these five businesses represent different monetization methods.
Another key monetization channel is investments, which is the essence of Tencent’s business model.
This diversification ensures sustained growth, unlike competitors that rely too heavily on a single business.
1.3 Investment Assets Near 1 Trillion Yuan
Tencent is often called ”China’s Berkshire Hathaway” due to its massive and highly successful investment portfolio:
Book value of investment portfolio: 817.7 billion yuan
Fair value of investment portfolio: 948.3 billion yuan
2.Highlights from the Financial Report
2.1 Shareholder Returns Exceed Expectations
2024 share repurchase: HK$112 billion (a record high).
2024 dividends: HK$32 billion.Total shareholder return: HK$144 billion (~3.2% of market cap as of May 2, 2025).
Repurchase permanently increase intrinsic value and are more tax-efficient than dividends.
For 2025, Tencent plans:
HK$80 billion in buybacks (lower due to higher stock prices).
HK$41 billion in dividends.
Total return: HK$121 billion (~2.7% yield).
This suggests management still sees the stock as fairly valued or even undervalued.
2.2 Gross Margin Jumps to 53%
A 5-percentage-point increase in gross margin is significant, especially given Tencent’s already high base.
This reflects improved business efficiency and profitability. However, further margin expansion may be limited.
2.3 Gaming Business Makes a Strong Comeback
2024 gaming revenue growth: 9.9% (domestic +10%, international +9%).
The quantity of ”Evergreen games” (high DAU & revenue) increased from 12 to 14 ,including(
Arena Of Valor),(Game for peace),(Naruto),(Dungeon & Fighter：origin),(Crown Legends: Battlefury)and so on.
Games like Arena Of Valor(with 100M+ DAU) benefit from:
Network effects (social gaming).
High switching costs (player investment).
Strong replayability.
- Marketing Serivces Becomes the Growth Driver
2024 ad revenue growth: 20% (fastest-growing segment).
Ad gross margin: Up 5 percentage points to 55%.
Tencent renamed its ad business from ”Online Advertising” to “Marketing Services”, signaling a strategic shift.
Despite having massive traffic, Tencent’s ad revenue has historically lagged peers due to:
Social apps being less ad-friendly.
Lack of a strong e-commerce ecosystem.
Conservative ad load policies.
However, with Wechat Channel, WeChat Search, Mini Programs, and AI-driven ad targeting, ad revenue could continue growing rapidly.
4. AI Business
Tencent’s AI assistant “Yuanbao” (powered by DeepSeek) saw 20x DAU growth from February to March 2025.
Advantages over competitors:
Access to high-quality WeChat public account data.
Direct integration into WeChat.
Abundant GPU resources for stable service.
However, Tencent’s in-house AI models still lag behind DeepSeek, ChatGPT, and others. The AI race is far from decided, and Tencent must invest heavily to stay competitive.
Conclusion
Tencent’s 2024 performance was stellar, with strong profit growth, margin expansion, and shareholder returns.
The 20.5x P/E suggests the stock is fairly valued but not overpriced.
Key risks:
AI competition remains fierce.
Regulatory pressures could resurface.
Ad growth must sustain momentum.
For long-term investors, Tencent remains a high-quality compounder, but further upside depends on execution in AI and advertising.