Source: cfp
AsianFin — Tencent's Interactive Entertainment Group (IEG) has made a resounding comeback in the beginning of 2025, with its gaming business demonstrating remarkable resilience and growth.
At Tencent's annual employee meeting in January, Tencent CEO Pony Ma praised IEG's performance as "very impressive." The momentum from 2024 has carried over into the 2025 winter vacation and Spring Festival period, reaffirming Tencent's dominance in the gaming industry.
Although emerging players like DeepSeek and the blockbuster movie Ne Zha: The Devil's Chaos were top news, Tencent has quietly dominated the gaming industry during the start of the year. The company swept the top five spots in SensorTower's China App Store mobile game revenue rankings, with Honor of Kings, Peacekeeper Elite, and CrossFire leading the pack in January. These titles saw revenue surges of 94%, 267%, and 421%, respectively, during the period. Dungeon & Fighter: Origin and Teamfight Tactics rounded out the top five. This stellarperformance drove Tencent's overall January revenue up by 62% month-on-month, solidifying its position as the global leader in mobile game publishing.
Nearly all of the top 30 games on China's iOS revenue chart released limited-edition skins and holiday-themed updates to drive player engagement and social sharing, according to GameLook. For instance, Honor of Kings saw a 6% month-on-month revenue increase in February 2024 after launching its Dragon Year limited-edition skins. This year, the game's recharge system reportedly crashed due to overwhelming player demand on New Year's Eve, underscoring its massive monetization potential.
The gaming industry is currently characterized by a "two giants, many strong players" dynamic, with Tencent and NetEase leading the pack. Tencent claimed 14 spots in the top 30 Spring Festival revenue rankings, while NetEase secured seven. Other notable entrants included games from Papergames, Diandian Interactive, and TuYou.
Tencent's dominance in the top five titles was driven by its massive daily active users (DAUs) base and strong social gaming ecosystem, according to a Huachuang Securities report. Honor of Kings, Peacekeeper Elite, and Teamfight Tactics held the top three spots, while CrossFire and League of Legends: Wild Rift competed for fourth and fifth places.
NetEase had a solid performance in titles that ranked 6-10, with Eggy Party and Identity V outperforming Tencent's Dungeon & Fighter: Origin and QQ Speed. Diandian Interactive's Endless Winter also broke into the top 10. The titles that ranked 11-15 featured a mix of Tencent's new shooters like Delta Force and Call of Duty: Mobile, as well as NetEase's Fantasy Westward Journey and casual games like Shoot the Zombies and Fishing Master. Notably, miHoYo, the developer behind Genshin Impact, did not have any titles in the top 15 this year.
A Rocky Road to Recovery
Tencent's gaming business had faced significant challenges since July 2021.. Following a freeze on game license approvals in July 2021, the company's domestic game revenue stagnated, and its stock price took a hit. Between Q4 2021 and Q4 2022, Tencent's domestic gaming revenue experienced five consecutive quarters of decline, with flagship titles like Honor of Kings and Peacekeeper Elite seeing reduced monetization. However, the tide began to turn in 2023, with international gaming revenue growing by 25% year-on-year in Q1, driven by new releases like League of Legends: Wild Rift and Teamfight Tactics.
By 2024, Tencent's gaming business had fully recovered. In Q1, Honor of Kings and Peacekeeper Elite returned to revenue growth, while Teamfight Tactics and CrossFire Mobile hit record highs. Q2 saw a 27% year-on-year increase in gaming revenue, accelerating from 11% growth in Q1. By Q3, domestic gaming revenue had grown by 14% year-on-year to RMB 37.3 billion, marking the best performance in three years.
Tencent's recovery can be attributed to a strategic shift in its gaming business. In 2023, the company announced 13 new titles, down from 20 in 2022, signaling a focus on quality over quantity. Tencent's leadership emphasized the importance of creating "evergreen games" that sustain long-term player engagement. This strategy has already borne fruit, with eight domestic games generating over RMB 4 billion in annual revenue in 2023.
Looking ahead, Tencent is investing heavily in new genres and global expansion. Upcoming titles like Honor of Kings: World, Final Fantasy XIV: Crystal World, and Dragon Breath: Divine Silence are highly anticipated. The company is also leveraging its vast user base and social platforms to strengthen its competitive edge. For instance, DreamStar, Tencent's answer to NetEase's Eggy Party, has rapidly gained traction, challenging the latter's early dominance in the party game genre.
The Rise of "Evergreen Games"
A key theme in Tencent's recent earnings calls has been the focus on "evergreen games"—titles that maintain long-term popularity and revenue streams. Tencent currently has 19 such games, including seven in international markets and 12 in China. This strategy aligns with the company's broader goal of becoming a global leader in interactive entertainment.
As Tencent continues to innovate and adapt, its gaming business remains a cornerstone of its growth. With a robust pipeline of new titles and a renewed focus on player engagement, Tencent is well-positioned to maintain its leadership in the gaming industry for years to come.
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