Tencent sees DnF Mobile as new evergreen hit, calls Valorant “biggest PC game in China” as its Q2 profit soars 82%

DnF Mobile

Financial highlights

• According to its earnings presentation, Tencent reached 161.1 billion yuan ($22.6 billion) in revenue in the second quarter, up 8% compared to the same period last year.
• Gross profit grew 21% year-over-year 85.9 billion yuan ($12.1 billion), while profit attributable to equity holders grew 82% to 47.6 billion yuan ($6.7 billion).

• The Domestic Games segment reached 34.6 billion yuan ($4.84 billion), up 9% year-over-year. The main drivers were Valorant and DnF Mobile.
• The latter successfully launched in China in May and generated $270 million in player spending on iOS alone in its first month. Tencent noted that Dungeon & Fighter Mobile is positioned to become its “next evergreen major hit” like Honor of Kings and PUBG Mobile.
• As for other domestic titles, Peacekeeper Elite (Chinese version of PUBG Mobile) saw double-digit growth in gross revenues, while Naruto Mobile reached 10 million average DAU in May.
• The International Games segment generated 13.9 billion yuan ($1.94 billion), up 9% year-over-year. The growth was mainly driven by PUBG Mobile (double-digit growth in average DAU and gross revenue) and Supercell’s games.
• Brawl Stars’ gross revenue increased more than 10x year-over-year. The game also reached a record quarterly average DAU.

Retention is key, plans to make evergreen games more sustainable

• As part of its new strategy, Tencent continues to adjust and rejuvenate its evergreen portfolio. This helped resume growth in its Domestic Games segment, with DnF Mobile being a new important contributor.
• “If we look purely at the China revenue than actually the launch of Valorant in China contributed almost as much to our year-on-year revenue growth as the launch of DnF Mobile this quarter,” Tencent chief strategy officer James Mitchell said during an earnings call. He also called Valorant “the biggest PC game in China” right now.
• The main metric that Tencent uses to evaluate each game’s potential is retention within the first month or two of launch, rather than revenue or downloads.
• “We see that in the 60-odd days since launch, Dungeon & Fighter Mobile has very good retention rates,” Mitchell said. “And of course, retention rates can fluctuate over time, but actually the first 30 days of the game’s life, those first 30-day retention rates are historically very good leading indicators for which games would enjoy the greatest longevity.”
• President Martin Lau added that one of the biggest challenges in the video game business is launching new games because “you have to come up with really good quality or a very differentiated gameplay in order to attract users.” So Tencent’s goal is to keep making its evergreen franchises more sustainable while also investing in new titles.
• The company has high hops for upcoming games in its pipeline, including Delta Force: Hawk Ops and Path of Exile 2 (developer Grinding Gear Games is wholly owned by Tencent). According to Mitchell, both titles “have the potential to become evergreen games in their own right.”