By Josh Ye
HONG KONG (Reuters) -China's Tencent Holdings (OTC:TCEHY) Ltd marked a return to revenue growth in the first quarter as it recovered from COVID-19-related disruptions and China's crackdown on video games a year earlier.
The world's largest video game company and operator of the WeChat messaging platform on Wednesday posted an 11% rise in revenue, beating analyst expectations.
Revenue reached 149.98 billion yuan ($21.70 billion) for the three months ended March 31, topping the 146.09 billion expected by 17 analysts polled by Refinitiv.
Net profit rose 11% to 25.83 billion yuan, missing the 29.61 billion expected by analysts.
Tencent posted its first annual revenue decline last year, impacted by China's now-abandoned zero-COVID policy and a months-long freeze on gaming licences by regulators.
But it is likely heading for a rebound this year after the government resumed licence approvals last year and gamers continue to splurge on its existing games. The firm unveiled a long pipeline of games on Monday, including seven titles ready to go online this summer.
Two of Tencent's most popular games -- Honour of Kings and CrossFire -- earned record revenue thanks to new added features and promotions, while newly launched games also recorded solid sales and user growth.
Domestic gaming revenue gained 6% to 35.1 billion yuan while international gaming revenue rose 25% to 13.2 billion yuan.
Chief strategy officer James Mitchell said on a call with analysts the company saw a "broad base recovery" for its games business.
"Out of our top 15 games, 12 were up year on year," he said, "Whether that is due to pent-up demand or underlying demand, time will tell."
Tencent's revenue from online ads rose 17% to 21 billion yuan. Revenue from fintech and business services grew 14% to 48.7 billion yuan.
Martin Lau, Tencent's president, told analysts China's regulations for fintech were moving towards normalization. China's central bank started an inspection of Tencent's payment service WeChat Pay, also known as Tenpay, in 2021.
"The inspection results are in the process of being finalized," Lau said.
Lau said Tencent was "making good progress" in building AI models and the Chinese government was supportive of innovations in the area.
While the U.S. imposed export controls on AI chips that can be shipped to China last year, Lau said chips were largely available "and there are workarounds of GPUs that can be sold in China."
($1 = 6.9121 Chinese yuan renminbi)