To The Moon

Q&A（Question-and-Answer Session）is a session after the company's prepared remarks where institutional investors and analysts ask management questions. In this dialogue, you may find some valuable information that might affect the stock price in the following weeks.

Now let's look at some key points from Tencent Q4 2022 Q&A Session Transcript  $TENCENT(00700)$ $Tencent Holding Ltd.(TCEHY)$

Q:Related to your cloud business. Can management share more details on whether the strategic shift of reducing the lower margin business largely behind us? And is that fair to assume that we will see growth gradually normalizing with faster rebound of the business and higher margins in the second half of this year?

A:In terms of cloud, I think you actually have answered your questions pretty well, right? I think the optimization shift is largely over. It's a pretty painful process. But after the entire effort, I think the business is actually in a much more sustainable and much higher quality state.And yes, we will see more with the business coming into the right shape, we will see normalizing growth and now it's time for the business to push for higher growth. And after the strategic shift, I think we now have a business that has an organization that's much more focused, nimble and efficient. We have a product mix that is focused on high margin, high value add as well as self-developed and recurring revenue.And at the same time, I think the operational procedure of the business has been improved in that we are much more capable in managing the cost for the highest part of the business as well as delivering better services to our customers. So I think the quality of the overall business has improved, and we're now in the right mode for pursuing higher growth, especially for the second half 2023.

Q:Just a follow-up on the AI. So do we have any plans to incorporate this generative AI technology into Weixin and also the QQ app in the coming future? And how would the foundation model convert to the higher revenue growth opportunity?

A:Now in terms of the generative AI, it's definitely natural, right, for us to incorporate some of these technologies into our flagship products like Weixin and QQ and we can actually improve the efficiency of the user experience. For example, we can actually allow mini program developers to develop mini programs at a much faster rate with these generative AIs.So that's in the category of content generation and we can also improve our customer service for our flagship products, so that each one will have a customer service assistant behind, right, these are all possible. And at the same time, if you think about on the front end, if there is a very good chatbot service that we develop, then we can easily incorporated intuition in QQ so that it enjoys the large distribution and customer reach of these platforms. So there's a lot of possibilities going forward, and that's why we call it a growth multiplier for us.

Q:If I look at some of your peers, this is typically quite an ops heavy business in terms of having teams doing whether it's customer service, logistics, things like that. Tencent has historically not done ops heavy businesses as much. Would love to hear some of your thoughts on whether that's a new direction that the Company plans to head and what that implies in terms of headcount or kind of investment in that direction.

A:In terms of live streaming e-commerce, we do believe this is a good opportunity for Video Accounts to develop over time. But I actually emphasize the word over time. So we our plan is actually to grow it on a consistent measured and high-quality basis. So it is true that in ecommerce business, you actually need to have heavier life operations. But and we do intend to put in a heavier life operation to support this.

But at the same time, we emphasize one that it is actually profitable, right? So even if you put in the live operations, the cost is going to be small compared to the potential benefits. But more importantly, the way that we're doing it will be, I think, much more thoughtful, much more efficient in the sense that we will try to focus on the high-quality merchants and high-quality product categories, which means that the lineups associated with these would be actually less because a lot of times, the live ops is actually focused on solving problems. And when we actually focus on high quality, the problems will be fewer.

We'll be much more focused on creating tools so that a lot of these live ops can be actually executed by tools. And as a matter of fact, AIGC will be very helpful in that regard. And if we want to grow it in a very, very fast manner and maybe you just have to load in a lot of people. But if we actually sort of stretch it over time, then we can actually build the tools to make our operations more efficient. And we'll also leverage on our existing infrastructure such as mini programs, such as existing brands who are already selling on our mini programs to make sure that we know these merchants. And as a result, the amount of live operations will be actually less and more efficient. So that's sort of the way we are going to tackle the problem.

The above Q&A are highlights that are edited for brevity. Click here for the full Tencent Q4 2022 Earnings Call Transcript.​​​​​​​​​​​​​​​

If you want to know more details, you can click here to re-watch the Tencent Q4 2022 Earnings Conference Call