Q2 2024 Tencent Holdings Ltd Earnings Call

Wendy Huang: and show how the sessions holding open up local questions. I will now pass it to Poh Lee.

Unknown Executive: Thank you for your discussion.

Unknown Executive: Oh, we open up global questions.

Unknown Executive: Oh, we open up global questions.

With local questions.

Unknown Executive: I will now pass into polls.

to arrange our discussion before we open up local questions.

Wendy Huang: Okay, thank you, Wendy.

Poh Lee: Great, thank you, Wendy. Good evening. Thank you, everyone, for joining us. Our second quarter 2024 results demonstrate the strength of our platform plus content strategy. Our domestic games revenue resumed growth, and our international game revenue accelerated growth due to increased user engagement with several of our evergreen titles and the successful launch of certain new games. Tencent Video achieved notable audience and subscriber growth with drama series developed from Chinese literature, IP, and produced internationally.

I will now pass it to Poh Lee. Great. Thank you, Wendy. Good evening. Thank you everyone for joining us.

Wendy Huang: I will now pass into polls. Okay, thank you, Wendy.

Unknown Executive: Thank you, everyone, for joining us.

Tony: Good evening. Thank you, everyone, for joining us. Our second quarter, 2024 results demonstrate the strength of our platform plus content strategy. Our domestic games revenue to zoom grows and our international game revenue accelerate growth due to increased user engagement as several of our ever-green titles and the successful launch of certain new games. Tencent video achieved a notable audience and subscribed growth with German series, developed from China Literature, IP and produced international, and implemented.

Unknown Executive: Our second quarter, 2024 results demonstrate the strength of our platform plus content strategy. Our domestic games revenue to zoom grows and our international game revenue accelerate growth due to increased user engagement as several of our ever-green titles and the successful launch of certain new games. Tencent Video achieved a notable audience and subscribed growth with German series, developed from China Literature, IP and produced international, and implemented. Looking forward, we continue to invest in our platforms and technologies, including AI, enabling us to create a new business value and better serve us. Looking at our financial number for the quarter, total revenue was 161 billion R&B, up 8% year year and 1% quarter and quarter.

Poh Lee: Our second quarter 2024 results demonstrate the strength of our platform plus content strategy.

Poh Lee: Our domestic game revenue has seen growth, and our international game revenue accelerated growth due to increased user engagement at several of our evergreen titles, and the successful launch of certain new games.

Speaker Change: Tencent Video achieved a notable audience and subscriber growth with drama series developed from China literature, IP, and produced internationally.

Poh Lee: Looking forward, we continue to invest in our platforms and technologies, including AI, enabling us to create new business value and better serve user needs. Looking at our financial numbers for the contract, total revenue is 161 billion RMB, up 8% year-on-year and 1% quote-unquote. Gross profit was 86 billion RMB, up 21% year-on-year and 2% quarter-on-quarter. Non-IFRS operating profit was 58 billion RMB, up 27% year-on-year or flat quarter-on-quarter.

Tony: Looking forward, we continue to invest in our platforms and technologies, including AI, enabling us to create a new business value and better serve use. Looking at our financial number for the quarter, total revenue was 161 billion R&B, up 8% year year and 1% quarter and quarter. Non-ISIS operating body was 58 billion R&B, up 27% year year of flat quarter and quarter. Turning to our key services, for communication and social networks, combine MAU of wishing and we chat year and year and quarter and quarter to 1.37 billion.

Speaker Change: Looking forward, we continue to invest in our platforms and technologies, including AI, enabling us to create new business value and better serve your needs.

Speaker Change: looking at our financial numbers for the quarter.

Speaker Change: Total revenue is 161 billion RMB, up 8% year-on-year, and 1%, quote-unquote.

Speaker Change: Gross profit was 86 billion RMB, up 21% year-on-year, and 2% quarter-on-quarter. Non-IFRS operating profit was 58 billion RMB, up 27% year-on-year, or flat quarter-on-quarter.

James Mitchell: Non-ISIS operating body was 58 billion R&B, up 27% year year of flat quarter and quarter. Turning to our key services, for communication and social networks, combine MAU of Wishing and We Chat year and year and quarter and quarter to 1.37 billion. For digital content, Tencent Video led the industry in terms of audience and subscriptions. For games, our proactive judgment through several of our leading games earlier in the year are yielding positive results with healthy user chance for our ever-green games and substantial popularity for several new games. For cloud and cloud, we come and Tencent Meeting includes their penetration in major industry, verticals and up so-called MAU pay functionalities.

Poh Lee: Tune in to our key services for Communication and Social Networking. Combining MAU of WeChat year-on-year and quarter-on-quarter to $1.37 billion. For digital content, Tencent Video leads the industry in terms of audience and subscription. Four games are proactive judgments for several of our leading games earlier in the year, yielding positive results with healthy user chance for our evergreen games and substantial popularity for several new games. For cloud enterprise SaaS, VConn and Tencent Meeting increased their penetration in major industry verticals and absorbed more payment functionality. I will now hand over to Martin and James for a business review. Thank you, Pony, and good evening and good morning to everybody.

Speaker Change: [inaudible]

Speaker Change: Turning to our key services.

Speaker Change: for Communication and Social Networks.

Speaker Change: Combine MAU of WeChat year-on-year and quarter-on-quarter to 1.37 billion. For digital content, hands-on video let the industry in terms of audience and subscriptions.

Tony: For digital content, Tencent video led the industry in terms of audience and subscriptions. For games, our proactive judgment through several of our leading games earlier in the year are yielding positive results with healthy user chance for our ever-green games and substantial popularity for several new games. For cloud and cloud, we come and Tencent meeting includes their penetration in major industry, verticals and up so-called MAU pay functionalities.

Speaker Change: For games, our proactive judgment to several of our leading games earlier in the year are yielding positive results with healthy user chance for our evergreen games and substantial popularity for several new games.

Speaker Change: For cloud enterprise SaaS, VConn and TensorMeeting increased their penetration in major industry verticals and absorbed more pay functionalities.

Unknown Executive: I will now hand over to Martin James for business review.

Martin James: I will now hand over to Martin James for Business Review. Thank you, Tony, and good evening and good morning to everybody. For the second quarter of 2024, our total revenue was up 8% year and year. That's represented 49% of our total revenue. Within which social networks of settlement was 19%, domestic games of settlement was 21% and international games was 9%. Online advertising was 19% of total revenue and FinTech and Business Services was 31% of total revenue.

James Mitchell: Thank you, Tony, and good evening and good morning to everybody. For the second quarter of 2024, our total revenue was up 8% year-on-year. That's represented 49% of our total revenue. Within which social networks of settlement was 19%, domestic games of settlement was 21%, and international games was 9%. Online advertising was 19% of total revenue, and FinTech and Business Services was 31% of total revenue. Running to gross profit, our overall gross profit growth was 21% year and year in the second quarter. Driven by growth in high margin revenue streams such as domestic games or revenues, video accounts advertising revenues, mini games platform services, and e-commerce technology service fees within video accounts, as well as cost saving initiatives.

Speaker Change: I will now hand over to Martin and James for business review.

Speaker Change: Thank you, Pony, and good evening and good morning to everybody.

Martin: For the second quarter of 2024, our total revenue was up 8% year-on-year. VAS represented 49% of our total revenue, within which the social network subsegment was 19%, the domestic game subsegment was 21%, and international games was 9%. Online advertising was 19% of total revenue, and FinTech and business services were 31% of total revenue.

Speaker Change: For the second quarter of 2024, our total revenue was up 8% year-on-year. VAS represented 49% of our total revenue, within which social network subsegment was 19%, domestic game subsegment was 21%, and international games was 9%.

Speaker Change: Online advertising was 19% of total revenue. And FinTech and business services was 31% of total revenue.

Martin James: Running to Gross Profit, our overall gross profit growth was 21% year and year in the second quarter. Driven by growth in high margin revenue streams such as domestic games or revenues, video accounts advertising revenues, mini games platform services and e-commerce technology service fees within video accounts, as well as cost saving initiatives. 000,000, James Mitchell, Lee Jiang, Lee Jiang, and all three were based on China literature and web novel IPs. Music subscription revenue increased 29% year-end year, supported by growth in subscriptions in Apple.

Martin: Turning to gross profit. Our overall gross profit growth was 21% year-on-year in the second quarter, driven by growth in high-margin revenue streams such as domestic games revenues, video account advertising revenues, minigames platform service fees, and e-commerce technology service fees within video accounts, as well as cost-saving initiatives. In the vast gross profit, bisegment, vast gross profit increased 12% year-on-year to 45 billion RMB Online advertising gross profit increased 36% year-on-year to 17 billion RMB, contributing 19% of total gross profit.

Speaker Change: Turning to gross profit, our overall gross profit growth was 21% year-on-year in the second quarter, driven by growth in high margin revenue streams such as domestic games revenues, video accounts advertising revenues,

Speaker Change: minigames platform service fees and e-commerce technology service fees within video accounts, as well as cost-saving initiatives.

Speaker Change: By segment, vast gross profit increased 12% year-on-year to 45 billion RMB representing 52% of our total gross profit.

Speaker Change: Online advertising gross profit increased 36% year-on-year to 17 billion RMB, contributing 19% of total gross profit.

Martin: And FinTech and business services gross profit increased by 29% year-on-year to 24 billion RMB, contributing 28% of total gross profit. Moving into business by segment for value-added services, segment revenue was 79 billion RMB, up 6% year-on-year. Social network revenue returned positive growth, up 2% year-on-year, driven by increased revenue from music and video subscriptions, mini-games platform service fees, and app-based game item sales, which was partially offset by decreased revenue from music and games-related live streaming services.

James Mitchell: James Mitchell, Lee Jiang, Lee Jiang, and all three were based on Chinese literature and web novel IPs. Music subscription revenue increased 29% year-end year, supported by growth in subscriptions in Apple. James turns into cooperation with labels and artists, releasing original soundtracks for Tencent Video Park filler drama series, and provided live music experiences through offline events and concert tours. Domestic games revenue resumed growth, up by 9% year-end year to 35 billion RMB, mainly driven by Valorant and new title DNF Mobile. Total growth receipts of domestic games grew faster than revenue in the second quarter. International games revenue increased by 9% year-end year in both reported and constant currency terms to 14 billion RMB, benefiting from the robust performance of PUBG Mobile, as well as contributions from superstar games.

Speaker Change: And FinTech and business services gross profit increased to 29% year-on-year to 24 billion RMB, contributing 28% of total gross profit.

Speaker Change: [inaudible]

Speaker Change: Moving into business by segment. For value-added services, segment revenue was 79 billion RMB, up 6% year-on-year.

Speaker Change: Social network revenue returns positive growth up 2% year-on-year driven by increased revenue from music and video subscriptions.

Speaker Change: minigames platform services, and app-based game item sales, which was partially offset by decreased revenue from music and games related live streaming services.

Martin: Long-form video subscription revenue increased 12% year-on-year as average daily video subscriptions increased 13% year-on-year to $117 million. Consumers are increasingly seeking out high quality IP and high production values in drama series. Our novel, Comics, and Games Platforms nurture high-quality IPs, while our studios, including Neoclassic Media, create high-production value-building content. For example, during the first half of 2024, out of the top three most watched drama series on China's online video platforms. The first and second were produced by New Classic Media and broadcast by Tencent Video, and all three were based on the China Literature Web novel IP.

Speaker Change: Long-form video subscription revenue increased 12% year-on-year as average daily video subscriptions increased 13% year-on-year to a hundred and seventeen million.

Speaker Change: Consumers are increasingly seeking out high-quality IP and high production value in drama series.

Speaker Change: comics and games platforms, nurture high-quality IPs,

Speaker Change: While our studios, including Neoclassic Media, create high-production value-building content.

Speaker Change: During the first half of 2024, out of the top three most watched drama series on China's online video platforms,

Speaker Change: The first and second were produced by New Classic Media and broadcast by Tencent Video, and all three were based on China Literature Web novel IPs.

Martin: Music subscription revenue increased 29% year-on-year, supported by growth in subscriptions in Apple. TMU strengthened cooperation with labels and artists, releasing original soundtracks for Tencent Video's popular drama series, and provided live music experiences through offline events and concert tools. Domestic games revenue resumed growth by 9% year-on-year to $35 billion RMB, mainly driven by Valorant and new title DNF Mobile. However, total gross receipts of domestic games grew faster than revenue in the second quarter.

Speaker Change: Music subscription revenue increased 29% year-on-year supported by growth in subscriptions in Apple.

Martin James: James turns into cooperation with labels and artists, releasing original soundtracks for Tencent Video Park filler drama series, and provided live music experiences through offline events and concert tours. Domestic games revenue resumed growth up by 9% year-end year to 35 billion RMB, mainly driven by valorant and new title DNF mobile. Total growth receipts of domestic games grew faster than revenue in the second quarter. International games revenue increased by 9% year-end year in both reported and constant currency terms to 14 billion RMB, benefiting from the robust performance of PUBG mobile, as well as contributions from superstar games.

Jamie Strauss: TME strengthened cooperation with labels and artists, releasing original soundtracks for Tencent Video's popular drama series, and provided live music experiences through offline events and concert tools.

Speaker Change: Domestic games revenue resumed growth up by 9% year-on-year to $35 billion RMB, mainly driven by Valorant and new title DNF Mobile.

Speaker Change: Total gross receipts of domestic games grew faster than revenue in the second quarter.

Martin: International games revenue increased by 9% year on year in both reported and constant currency terms to 14 billion RMB, benefiting from the robust performance of PUBG Mobile, as well as contributions from Supercell Games. However, total gross receipts of international games grew substantially faster than revenue in the second quarter. For communications and social networking, we enhanced functionalities and enriched content across our platforms, including video accounts, mini programs, and Tencent channels. For video accounts, user time spent increased significantly in the second quarter, benefiting from enhanced algorithms and more local content.

Speaker Change: International games revenue increased by 9% year on year in both reported and constant currency terms to 14 billion RMB, benefiting from the robust performance of PUBG Mobile, as well as contributions from Supercell Games.

James Mitchell: Total growth receipts of international games grew substantially faster than revenue in the second quarter. For communications and social network, we enhanced functionalities and enriched content across our platforms, including video accounts, mini programs, and Tencent channels. For video accounts, the user time spent increased significantly year-end year in the second quarter, benefiting from enhanced algorithms and more local content. A thriving content ecosystem enabled creators to reach a wider audience and generate increased revenue. The number of creators that generate close look revenue from their video accounts more than triple the year and year, showing a much more vibrant content ecosystem to facilitate e-commerce activity where enhancing transaction capabilities in a systematic way to deliver seamless shopping experience to users and drive sales for merges.

Martin James: Total growth receipts of international games grew substantially faster than revenue in the second quarter. For communications and social network, we enhanced functionalities and enriched content across our platforms, including video accounts, mini programs and Tencent channels. For video accounts, the user time spent increased significantly year-end year in the second quarter, benefiting from enhanced algorithms and more local content. A thriving content ecosystem enabled creators to reach a wider audience and generate increased revenue.

Speaker Change: Total gross receipts of international games grew substantially faster than revenue in the second quarter.

Speaker Change: For communications and social network, we enhanced functionalities and enriched content across our platforms, including video accounts, mini programs, and Tencent channels.

Speaker Change: For video accounts, the user time spent increased significantly in the second quarter, benefiting from enhanced algorithms and more local content. Our thriving content ecosystem enabled

Martin: A Thriving Content Ecosystem Enabled. Creators to reach a wider audience and generate increased revenue. The number of creators that generate closed loop revenue from their video accounts more than tripled year on year, showing a much more vibrant content ecosystem to facilitate e-commerce activity where transaction capabilities are enhanced in a systematic way to deliver a seamless shopping experience to users and drive sales for merchants. Many programs have become an increasingly powerful platform for users to connect with merchants and content providers offline and online. Total user time spent on mini-programs increased over 20% year-on-year in the second quarter.

Martin James: The number of creators that generate close look revenue from their video accounts more than triple the year and year, showing a much more vibrant content ecosystem to facilitate e-commerce activity where enhancing transaction capabilities in a systematic way to deliver seamless shopping experience to users and drive sales for merges. Meaning programs have become an increasingly powerful platform for users to connect with merchants and content providers offline and online. Total user time spent on meaning programs increased over 20% year and year in the second quarter.

Speaker Change: Creators to reach a wider audience and generate increased revenue.

Speaker Change: The number of creators that generate closed loop revenue from their video accounts more than tripled year-on-year.

Speaker Change: showing a much more vibrant content ecosystem.

Speaker Change: To facilitate e-commerce activity, we're enhancing transaction capabilities in a systematic way to deliver a seamless shopping experience to users and drive sales for merchants.

James Mitchell: Meaning programs have become an increasingly powerful platform for users to connect with merchants and content providers offline and online. Total user time spent on meaning programs increased over 20% year and year in the second quarter. GME facilitated by many programs grew double digit percentage year and year. For mini games, total gross receipts increased over 30% year-on-year. And as a testimony to the diversity of the games, more than 140 mini games each achieved total gross receipts of over 10 million R&B during the quarter. Lastly, Tencent channels served as a community-based platform in which moderators can manage and present content advantage via customizable tools, while users can interact via text, image, and live streaming.

Speaker Change: Meaning programs have become an increasingly powerful platform for users to connect with merchants and content providers offline and online.

Speaker Change: Total user time spent on mini-programs increased over 20% year-on-year in the second quarter.

Martin James: GME facilitated by many programs grew double digit percentage year and year. For mini games, total gross receipts increased over 30% year and year. And as a testimony to the diversity of the games, more than 140 mini games each achieved total gross receipts of over 10 million R&B during the quarter. Lastly, Tencent channels served as a community based platform in which moderators can manage and present content advantage via customizable tools while users can interact via text image and live streaming. We recently upgraded and rebranded Tencent channels previously known as QQ channels and now users can join channels from Waysian and from Game Apps in addition to QQ.

James: GME facilitated by many programs grew by a double-digit percentage year on year. For minigames, total gross receipts increased by over 30% year-on-year. And as a testament to the diversity of the games, more than 140 mini games each achieved total gross receipts of over 10 million RMB during the quarter. Lastly, Tencent Channels serves as a community-based platform in which moderators can manage and present content and events via customizable tools, while users can interact via text, image, and live streaming.

Speaker Change: GME is facilitated by many programs grew a double-digit percentage year-on-year. For mini-games, total gross receipts increased over 30% year-on-year.

Speaker Change: And as a testimony to the diversity of the games, more than 140 mini games, each achieved total gross receipts of over 10 million RMB during the quarter.

Speaker Change: Lastly, Tencent Channels served as a community-based platform in which moderators can manage and present content and events via customizable tools, while users can interact via text, image, and live streaming.

James Mitchell: We recently upgraded and rebranded Tencent Channels, previously known as QQ Channels, and now users can join channels from Waysian and from game apps in addition to QQ. Tencent channels have gained notable popularity among game players and university students, who are early adopters and promoters of channels advanced to functionality.

James: We recently upgraded and rebranded Tencent channels, previously known as QQ channels, and now users can join channels from WeChat and from game apps in addition to QQ. Tencent channels have gained notable popularity among game players and university students, who are early adopters and promoters of their advanced functionality. With that, I'll pass to James.

Speaker Change: We recently upgraded and rebranded Tencent Channels, previously known as QQ Channels, and now users can join channels from WeChat and from game apps in addition to QQ.

Martin James: Tencent channels have gained notable popularity among game players and university students, who are early adopters and promoters of channels advanced to functionality. With that, I'll pass to James. Thank you, Martin.

Speaker Change: Tencent channels have gained notable popularity among game players and university students, while early adopters and promoters of channels advanced functionality.

Unknown Executive: With that, I'll pass to James.

James Mitchell: Thank you, Martin. Moving on to domestic games, Peacekeeper Elite grew its gross receipts by a double-digit percentage year and year in the second quarter. With popular Egyptian themes and anime-themed outfits, we introduced Metro Roy out an extraction shooter game mode that's already proven attractive in PUBG Mobile and which resulted in Peacekeeper Elite's DAU resuming year-on-year growth in July. Honour of Kings also increased its gross receipts year on year in the second quarter, benefiting from adjustments we made that spread out the timing of I value virtual item sales throughout the year, as well as from enhanced content design.

James: Thank you, Martin. Moving on to domestic games, Peacekeeper Elite grew its gross receipts by a double digit percentage year on year in the second quarter, with popular Egyptian-themed and anime-themed outfits. We introduced Metro Royale, an extraction shooter game mode that's already proven attractive in PUBG mobile and which resulted in Peacekeeper Elite's DAU resuming year-on-year growth in July. Honor of Kings also increased its post receipts year-on-year in the second quarter, benefiting from adjustments we made that spread out the timing of high-value virtual item sales throughout the year, as well as from enhanced content design. And Naruto Mobile achieved a new milestone of 10 million average daily active users in May as marketing activities boosted its new player acquisition, while enriched theme content has re-engaged its existing user base.

James Mitchell: Moving on to domestic games, Peacekeeper Elite grew its gross receipts by a double digit percentage year and year in the second quarter. With popular Egyptian themes and anime themed outfits, we introduced Metro Roy out an extraction shooter game mode that's already proven attractive in PUBG Mobile and which resulted in Peacekeeper Elite's DAU resuming year on year growth in July. Honour of Kings also increased its gross receipts year on year in the second quarter, benefiting from adjustments we made that spread out the timing of I value virtual item sales throughout the year, as well as from enhanced content design.

Speaker Change: With that, I'll pass to James.

James: Thank you, Martin. Moving on to domestic games, Peacekeeper Elite grew its gross receipts by a double-digit percentage year-on-year in the second quarter with popular Egyptian-themed and anime-themed outfits.

Speaker Change: We introduced Metro Royale, an extraction shooter game mode that's already proven attractive in PUBG Mobile, and which resulted in Peacekeeper Elite's DAU resuming year-on-year growth in July.

Speaker Change: Honor of Kings also increased its post receipts year on year in the second quarter, benefiting from adjustments we made that spread out the timing of high-value virtual item sales throughout the year, as well as from enhanced content design.

James Mitchell: And the rich mobile to keep a new milestone of 10 million average daily active users in May as marking activities of boost to its new player acquisition while enriched in content has reengaged its existing use of base.

James Mitchell: And the rich mobile to keep a new milestone of 10 million average daily active users in May as marking activities of boost to its new player acquisition while enriched in content has reengaged its existing use of base. Among new releases, DNF Mobile has emerged as one of the most successful mobile games in China. The game reactivated millions of DNF IP fans and more importantly for long term success, we're seeing high user attention rates due to proven gameplay, abundant content, and active local publishing which together positioned the game to become our next evergreen major hit lead for speed mobile launched in July as attracting millions of DAUs by providing a range of thriving centric activities within an open world city experience.

Speaker Change: And Naruto Mobile achieved a new milestone of 10 million average daily active users in May, as marketing activities have boosted its new player acquisition, while enriched theme content has re-engaged its existing user base.

James: Among new releases, DNF Mobile has emerged as one of the most successful mobile games in China. The game reactivated millions of DNF IP fans, and more importantly, for long-term success, we're seeing high user retention rates due to proven gameplay, abundant content, and active local publishing, which together positioned the game to become our next evergreen major hit. The Need for Speed Mobile, launched in July, is attracting millions of DAUs by providing a range of driving-centric activities within an open-world city experience.

James Mitchell: Among new releases, DNF Mobile has emerged as one of the most successful mobile games in China. The game reactivated millions of DNF IP fans and, more importantly for long-term success, we're seeing high user attention rates due to proven gameplay, abundant content, and active local publishing, which together positioned the game to become our next evergreen major hit. Lead for Speed mobile launched in July, attracting millions of DAUs by providing a range of thriving centric activities within an open world city experience. Among our international games, PUBG Mobile's DAU and gross receipts achieved double-digit growth year on year driven by the new MAKA Fusion mode, the Golden Moon events, and Alliance-themed top-tier outfit.

Speaker Change: Among new releases, DNF Mobile has emerged as one of the most successful mobile games in China.

Speaker Change: The game reactivated millions of DNF IP fans, and more importantly for long-term success, we're seeing high user retention rates due to proven gameplay, abundant content, and active local publishing, which together positioned the game to become our next evergreen major hit.

Speaker Change: Speed for Speed Mobile, launched in July , is attracting millions of DAUs by providing a range of driving-centric activities within an open-world city experience.

James: Among our international games, PUBG Mobile's DAU and gross receipts achieved double-digit growth year-on-year, driven by the new Mecha Fusion mode, the Golden Moon events, and Alliance-themed top-tier outfits. Brawl Stars gross receipts grew more than tenfold year-on-year. Average DAU achieved a historical high and ranked Brawl as the third highest mobile game across the entire industry by DAU in international markets in the quarter. These achievements flowed from frequent content updates, such as an IP collaboration with Godzilla, and social features, such as the thumbs-up for Brawl event.

James Mitchell: Among our international games, PUBG Mobile's DAU and gross receipts achieved double digit growth year on year driven by the new MAKA Fusion mode, the Golden Moon events and Alliance themed top tier outfit. Broad stars gross receipts grew more than 10 folds year on year, average DAU achieved a historical high and ranked for all is the third highest mobile game across the entire industry by DAU in international markets in the quarter. These achievements flowed from frequent content updates such as an IP collaboration with Godzilla and social features such as the thumbs up for broad event.

Speaker Change: Among our international games, PUBG Mobile's DAU and gross receipts achieve double-digit growth year-on-year, driven by the new Mecha Fusion mode, the Golden Moon events, and Alliance-themed top-tier outfit.

James Mitchell: Broad stars gross receipts grew more than 10 folds year on year, average DAU achieved a historical high and ranked for all is the third highest mobile game across the entire industry by DAU in international markets in the quarter. These achievements flowed from frequent content updates such as an IP collaboration with Godzilla and social features such as the thumbs up for broad event.

Speaker Change: Brawl Stars gross receipts grew more than tenfold year-on-year. Average DAU achieved a historical high and ranked Brawl as the third highest mobile game across the entire industry by DAU in international markets in the quarter.

Speaker Change: These achievements flowed from frequent content updates such as an IT collaboration with Godzilla and social features such as the Thumbs Up for Brawl event.

James: Valorant MAUs grew year on year benefiting from high quality content updates such as the new Ancient Clove and new map Abyss, the first Valorant map with no outer boundary. Two international esports events, Masters Madrid and Masters Shanghai, expanded Valorant's global IP influence. Squad Busters is a casual PvP and PvE action game with real-time strategy elements and a Supercell character collection. It launched on May 29.

James Mitchell: Valorant's MEU's Rue Year on Year, benefiting from high-quality content updates such as New H and Clobe, New Map of this, the first Valorant map with no outer boundaries, two international eSports events, Masters, Madrid and Masters Changhai, expanded Valorant's global IP influence. Squad Busters, a casual PVP, PvE action game with real-time strategy elements, the Supercell Character Collection launched on May 29th. Squad Busters has established critical mass in the key North America and West in Europe regions, and Supercell will be adding new game modes and social features to the game to further expand its fan-based worldwide. For online advertising, revenue grew 19% year-on-year driven by increased ad spend for most categories, particularly games, e-commerce, and education.

James Mitchell: Valorant's MEU's Rue Year on Year, benefiting from high-quality content updates such as New H and Clobe, New Map of this, the first Valorant map with no outer boundaries, two international eSports events, masters, Madrid and masters Changhai, expanded Valorant's global IP influence. Squad Busters, a casual PVP, PvE action game with real-time strategy elements, the Supercell Character Collection launched on May 29th. Squad Busters has established critical mass in the key North America and West in Europe regions, and Supercell will be adding new game modes and social features to the game to further expand its fan-based worldwide.

Speaker Change: Valorant's MAUs grew year-on-year benefiting from high-quality content updates such as new Ancient Globe and new map Abyss, the first Valorant map with no outer boundaries.

Speaker Change: Two international esports events, Masters Madrid and Masters Shanghai, expanded Valorant's global IP influence.

Speaker Change: Squad Busters, a casual PvP PvE action game with real-time strategy elements and supercell character collection, launched on May 29th.

James: Spodbusters has established critical mass in the key North America and Western Europe regions, and Supercell will be adding new game modes and social features to the game to further expand its fan base worldwide. For online advertising, revenue grew 19% year-on-year, driven by increased ad spend for most categories, particularly games, e-commerce, and education. The deceleration in consumption spending in China is a headwind to advertising eCPM prices, and that affects our brand advertising and ad network trends.

Speaker Change: Squadbusters has established critical mass in the key North America and Western Europe regions, and Supercell will be adding new game modes and social features to the game to further expand its fanbase worldwide.

James Mitchell: For online advertising, revenue grew 19% year-on-year driven by increased ad spend for most categories, particularly games e-commerce and education. The de-stabilization and consumption spending in China is a headwind to advertising ECPM pricing, and thus to our brand advertising and ad network trends. But we believe we'll continue improving our advertising market share, and our advertising business should benefit once consumer spending approves. For our ad tech, we upgraded our machine learning platform to analyze user interests over a longer-time horizon of years rather than months, while processing signals more frequently.

Speaker Change: For online advertising, revenue grew 19% year on year, driven by increased ad spend for most categories, particularly games, e-commerce, and education. The deceleration in consumption spending in China is a headwind to advertising eCPM pricing.

James Mitchell: The de-stabilization and consumption spending in China is a headwind to advertising ECPM pricing, and thus to our brand advertising and ad network trends. But we believe we'll continue improving our advertising market share, and our advertising business should benefit once consumer spending approves. For our ad tech, we upgraded our machine learning platform to analyze user interests over a longer time horizon of years rather than months, while processing signals more frequently. These changes enable us to gain deeper user insights and provide more relevant ad recommendations, thus boosting click-through rates and revenue. By property, video accounts ad revenue increased over 80% year-on-year, fueled by rising short video engagement as well as demand for live streaming options.

James: But we believe we'll continue improving our advertising market share, and our advertising business should benefit once consumer spending improves. For our ad tech, we upgraded our machine learning platform to analyze user interests over a longer time horizon of years rather than months, while processing signals more frequently.

Speaker Change: And that's to our brand advertising and ad network trends, but we believe we'll continue improving our advertising market share and our advertising business should benefit once consumer spending improves.

Speaker Change: For our ad tech, we upgraded our machine learning platform to analyze user interests over a longer time horizon of years rather than months, while processing signals more frequently. These changes enable us to gain deeper user insights and provide more relevant ad recommendations, thus boosting click-through rates and revenue.

James: These changes enable us to gain deeper user insights and provide more relevant ad recommendations, thus boosting click-through rates and revenue. By property, video accounts ad revenue increased over 80% year-on-year, fueled by rising short video engagement as well as demand for live streaming promotion. Tencent video ad revenue grew over 30% year-on-year, despite weak branded ad spend market-wide, as our popular self-commissioned drama series, such as Joy of Life 2 and The Tale of Rose, attracted sponsorship spend. However, our mobile ad network revenue dropped year-on-year as certain internet services companies reduced their overall advertising spend.

James Mitchell: These changes enable us to gain deeper user insights and provide more relevant ad recommendations thus boosting click-through rates and revenue. By property, video accounts ad revenue increased over 80% year-on-year, fueled by rising short video engagement as well as demand for live streaming options. Tencent video ad revenue grew over 30% year-on-year, despite weak-ranked ad spend market-wide, as our popular self-commissioned drama series, such as Joy of Life 2 and The Tale of Rose, attracted sponsorship spend. However, our mobile ad network revenue dropped year-on-year as certain internet service companies reduced their overall advertising spend.

Speaker Change: By property, video accounts ad revenue increased over 80% year-on-year, fueled by rising short video engagement as well as demand for live streaming promotions.

James Mitchell: Tencent video ad revenue grew over 30% year-on-year, despite weak-ranked ad spend market-wide, as our popular self-commissioned drama series, such as Joy of Life 2 and The Tale of Rose, attracted sponsorship spend.

Speaker Change: Tencent video ad revenue grew over 30% year-on-year, despite weak branded ad spend market-wide, as our popular self-commissioned drama series such as Joy of Life 2 and The Tale of Rose attracted sponsorship spend.

James Mitchell: However, our mobile ad network revenue dropped year-on-year as certain Internet service companies reduced their overall advertising spend. Looking at fintech and business services, segment revenue was 50 billion revenue in up 4% year-on-year. Our fintech services revenue growths go to a low single-digit year-on-year growth rate. The number of commercial payment transactions continued to increase at a healthy rate year-on-year, but the average of value per payment transaction declined year-on-year due to slow consumer spending, causing further moderation in our commercial payment revenue growth. But given the continuing growth in number of transactions, we believe that our market share is quite stable.

Speaker Change: However, our mobile ad network revenue dropped year-on-year as certain internet services companies reduced their overall advertising spend.

James: Looking at FinTech and business services, segment revenue was $50 billion; revenue would be up 4% year-on-year. However, our FinTech services revenue growths go to a low single-digit year-on-year growth rate. The number of commercial payment transactions continues to increase at a healthy rate year on year, but the average value per payment transaction declined year on year due to slow consumer spending, causing further moderation in our commercial payment revenue growth. But given the continuing growth in the number of transactions, we believe that our market share is quite stable, and we therefore expect our commercial payment revenue to improve once consumer spending picks up. Our consumer loan services revenue decreased year on year as WeBank and Tencent proactively adopted more cautious credit extension policies in light of subdued consumption trends.

James Mitchell: Looking at fintech and business services, segment revenue was 50 billion revenue in up 4% year-on-year. Our fintech services revenue growths go to a low single-digit year-on-year growth rate. The number of commercial payment transactions continued to increase at a healthy rate year-on-year, but the average of value per payment transaction declined year-on-year due to slow consumer spending causing further moderation in our commercial payment revenue growth. But given the continuing growth in number of transactions, we believe that our market share is quite stable.

Speaker Change: Looking at fintech and business services, segment revenue is 50 billion revenue and be up 4% year-on-year. Our fintech services revenue growths go to a low single-digit year-on-year growth rate.

Speaker Change: The number of commercial payment transactions continued to increase at a healthy rate year-on-year, but the average value per payment transaction declined year-on-year due to slow consumer spending, causing further moderation in our commercial payment revenue growth.

Speaker Change: But given the continuing growth in number of transactions, we believe that our market share is quite stable, and we therefore expect our commercial payment revenue to improve once consumer spending picks up.

James Mitchell: And we therefore expect our commercial payment revenue to improve once consumer spending picks up. Our consumer loan services revenue decreased year-on-year, as we bank and Tencent proactively adopted more cautious credit extension policies in light of subcute consumption trends. Our wealth management revenue grew to double-digit year-on-year due to increases in the number of users and in aggregate customer assets, as consumers generally saved more and spent less. Turning to business services, revenue grew at a teens-rate year-on-year in the second quarter, benefiting from higher cloud services revenue and increased technology service fees generated from rising video accounts, e-commerce, and transaction volumes.

James Mitchell: And we therefore expect our commercial payment revenue to improve once consumer spending picks up. Our consumer loan services revenue decreased year-on-year, as we bank and Tencent proactively adopted more cautious credit extension policies in light of subcute consumption trends. Our wealth management revenue grew to double-digit year-on-year due to increases in the number of users and in aggregate customer assets, as consumers generally saved more and spent less.

Speaker Change: Our consumer loan services revenue decreased year-on-year as WeBank and Tencent proactively adopted more cautious credit extension policies in light of subdued consumption trends.

James: Our wealth management revenue grew at a double-digit rate year-on-year due to increases in the number of users and in aggregated customer assets, as consumers generally saved more and spent less. Turning to business services, revenue grew at a teens rate year-on-year in the second quarter, benefiting from higher cloud services revenue and increased technology service fees generated from rising video accounts and e-commerce transaction volume. Business services gross profit rose significantly year-on-year due to the increased contribution of higher-margin revenue streams as well as improved efficiency.

Speaker Change: Our wealth management revenue grew at a double-digit year-on-year due to increases in the number of users and in aggregate customer assets as consumers generally save more and spend less.

James Mitchell: Turning to business services, revenue grew at a teens-rate year-on-year in the second quarter, benefiting from higher cloud services revenue and increased technology service fees generated from rising video accounts, e-commerce, transaction volumes. Business services gross profit rose significantly year-on-year due to the increased contribution of higher margin value streams, as well as improved efficiency. In We Com, merchants are increasingly willing to pay for advanced communication functionalities, such as customer service chat groups, and We Com revenue according to the increased significant the year and year.

Speaker Change: Turning to business services, revenue grew at a teens rate year-on-year in the second quarter, benefiting from higher cloud services revenue and increased technology service fees generated from rising video accounts, e-commerce, transaction volumes.

James Mitchell: Business services gross profit rose significantly year-on-year due to the increased contribution of higher margin value streams, as well as improved efficiency. In We Com, merchants are increasingly willing to pay for advanced communication functionalities, such as customer service chat groups, and We Com revenue according to the increased significant the year and year. Tencent meets in deep and dips adoption monetization, especially in the pharmaceutical manufacturing and retail sectors. We're generating increasing AI-related external revenue from customers utilizing our high performance computing infrastructure, such as GPUs, and our model library services.

Speaker Change: Business services gross profit rose significantly year-on-year due to the increased contribution of higher margin value streams as well as improved efficiency.

James: In WECOM, merchants are increasingly willing to pay for advanced communication functionalities, such as customer service chat groups, and WECOM revenue accordingly increased significantly year on year. Tencent meeting deepened its adoption and monetization, especially in the pharmaceutical manufacturing and retail sectors. We're generating increasing AI-related external revenue from customers utilizing our high-performance computing infrastructure, such as GPUs, and our model library services. We recently launched three AI-powered platform solutions for enterprises, Image Generation Engine and Video Generation Engine, which are particularly useful for advertisers creating ad content, as well as Knowledge Engine, which is particularly useful for finance, education, and retail-related services deploying customer service chat. And now I'll pass to John for the financial review. Thank you, James. Hello everyone.

Speaker Change: In WECOM, merchants are increasingly willing to pay for advanced communication functionalities such as customer service chat groups, and WECOM revenue accordingly increased significantly year-on-year.

James Mitchell: Tencent meets in deep and dips adoption monetization, especially in the pharmaceutical manufacturing and retail sectors. We're generating increasing AI-related external revenue from customers utilizing our high performance computing infrastructure, such as GPUs, and our model library services. We recently launched three AI powered platform solutions for enterprises, image generation engine and video generation engine, which are particularly useful for advertisers creating ad content, as well as knowledge engine, which is particularly useful for finance education and retail related services deploying customer service chat box.

Speaker Change: Tencent meeting deepened its adoption and monetization, especially in the pharmaceutical manufacturing and retail sectors.

Speaker Change: We're generating increasing AI related external revenue from customers utilizing our high-performance computing infrastructure.

James Mitchell: We recently launched three AI powered platform solutions for enterprises: image generation engine and video generation engine, which are particularly useful for advertisers creating ad content, as well as knowledge engine, which is particularly useful for finance education and retail related services deploying customer service chat box.

Speaker Change: such as GPUs, and our model library services.

Speaker Change: We recently launched three AI-powered platform solutions for enterprises.

Speaker Change: Image generation engine and video generation engine, which are particularly useful for advertisers creating ad content, as well as knowledge engine, which is particularly useful for finance, education and retail related services, deploying customer service chatbots.

John: And now I'll pass to John for the financial review.

John: And now I'll pass to John to the financial review. Thank you, James. Hello, everyone. For the second quarter of 2024, total revenue was 161.1 billion RMB up 8% year and year. Gross profit was 85.9 billion RMB up 21% year and year. Operating profit was 50.7 billion RMB up 40% year and year. Interesting come was 3.9 billion RMB up 13% year and year driven by growth and cash reserves. Finance calls were 3.1 billion RMB down 5% year and year due to a reduced capital level.

John: Thank you, James.

John: For the second quarter of 2024, total revenue was 161.1 billion renminbi, up 8% year on year. Gross profit was 85.9 billion renminbi, up 21% year on year. Operating profit was 50.7 billion renminbi, up 40% year on year. Interest income was 3.9 billion renminbi, up 13% year on year driven by growth in cash reserve.

Speaker Change: And now I'll pass it to John for the financial review.

John: Hello, everyone. For the second quarter of 2024, total revenue was 161.1 billion RMB, up 8% year on year. Gross profit was 85.9 billion RMB, up 21% year on year. Operating profit was 50.7 billion RMB, up 40% year-on-year. Interesting come was 3.9 billion RMB, up 13% year and year, driven by growth and cash reserves. Finance calls were 3.1 billion RMB, down 5% year and year due to a reduced capital level. She had profit of associated and JV was 7.7 billion RMB compared to profit of 1.2 billion RMB in the same period last year. On a non-Eivara basis, she had profit was 9.9 billion RMB, up from profit of 3.9 billion RMB last year, driven by improved performance at certain domestic associates and at certain overseas games studio associates.

John: Finance costs were $3.1 billion RMB, down 5% year-on-year due to a reduced debt level; share of profit of Associated and JV was 7.7 billion renminbi compared to profit of 1.2 billion renminbi in the same period last year. On a non-IVRF basis, share of profit was 9.9 billion renminbi, up from profit of 3.9 billion renminbi last year, Income tax expense declined by 9% year-on-year to 10.1 billion renminbi, primarily due to the high base in the same quarter last year resulting from an overseas subsidiary's deeper tax adjustments.

James: Thank you, James. Hello, everyone. For the second quarter of 2024, total revenue was 161.1 billion renminbi, up 8% year-on-year. Gross profit was $85 billion.

Speaker Change: 3.9 billion RMB up 21% year-on-year. Operating profit was 50.7 billion RMB up 40% year-on-year. Interest income was 3.9 billion RMB up 13% year-on-year driven by growth in cash reserves.

Speaker Change: Finance costs were 3.1 billion RMB down 5% year-on-year due to a reduced cap level.

John: She had profit of associated and JV was 7.7 billion RMB compared to profit of 1.2 billion RMB in the same period last year. On a non-Eivara basis, she had profit was 9.9 billion RMB up from profit of 3.9 billion RMB last year, driven by improved performance at certain domestic associates and at certain overseas games studio associates. The income tax expense declined by 9% year and year to 10.1 billion RMB, primarily due to the high phase in the same quarter last year resulting from an overseas subsidiary steeper tax adjustment.

Speaker Change: share of profit of Associated and JV was 7.7 billion renminbi compared to profit of 1.2 billion renminbi in the same period last year. On a non-IVRF basis, share of profit was

Speaker Change: 9.9 billion renminbi up from profit of 3.9 billion renminbi last year, driven by improved performance at certain domestic associates and at certain overseas game studio associates.

John: The income tax expense declined by 9% year and year to 10.1 billion RMB, primarily due to the high phase in the same quarter last year resulting from an overseas subsidiary steeper tax adjustment. A domestic corporate income tax expense in the second quarter of 2024 increased year and year. On non-Eivara financial figures, operating profit was 58.4 billion RMB, up 27% year and year. Net profit attributable to equity of this was 57.3 billion RMB, up 53% year and year. The difference in year and year growth rates between operating profit and net profit was due to higher non-Eivara share of profit from associates and JV, which increased to 9.9 billion RMB, which is quarter from 3.9 billion RMB, same quarter last year, as well as lower income tax due to previously mentioned high phase impacts.

Speaker Change: Income tax expense declined by 9% year-on-year to 10.1 billion RMB, primarily due to the high base in the same quarter last year, resulting from an overseas subsidiary's deeper tax adjustment.

John: A domestic corporate income tax expense in the second quarter of 2024 increased year-on-year. On non-iVirus financial figures, operating profit was 58.4 billion RMB, up 27% year-on-year. Net profit attributable to equity holders was 57.3 billion RMB, up 53% year-on-year. The difference in year-on-year growth rates between operating profit and net profit was due to higher non-iVirus share of profit from associates and JV, which increased to 9.9 billion RMB this quarter from 3.9 billion RMB same quarter last year, as well as lower income tax due to the previously mentioned high base impact.

John: A domestic corporate income tax expense in the second quarter of 2024 increased year and year. On non-Eivara financial figures, operating profit was 58.4 billion RMB up 27% year and year. Net profit attributable to equity of this was 57.3 billion RMB up 53% year and year. The difference in year and year growth rates between operating profit and net profit was due to higher non-Eivara share of profit from associates and JV, which increased to 9.9 billion RMB, which is quarter from 3.9 billion RMB, same quarter last year, as well as lower income tax due to previously mentioned high phase impacts.

Speaker Change: A domestic corporate income tax expense in the second quarter of 2024 increased year-on-year.

Speaker Change: on non-iVirus financial figures. Operating profit was 58.4 billion RMB, up 27% year-on-year. Net profit attributable to equity holders was 57.3 billion RMB, up 53% year-on-year.

Speaker Change: The difference in year-on-year growth rates between Operating Profit and Net Profit was due to higher non-RFIR share of profits from Associates and JV, which increased to $9.9 billion RMB this quarter from $3.9 billion RMB same quarter last year.

Speaker Change: as well as lower income tax due to previously mentioned high base impact.

John: The lucid EPS was 6.014 RMB, up 55% year and year, outpacing non-Eivara economic growth due to reduced share count from share buybacks. For the second quarter of 2024, a weighted average number of shares for calculating by the lucid EPS decreased by 1.9% year and year. Moving on to growth margins, overall growth margin was 53%, up 6% year and year. By setman, value added services growth margin was 57%, up 3% year and year due to improve margins in long form redo and gains businesses. Alongside our effective control of operating costs. On our advertising growth module increased to 56% up to 7% in 20 years, primarily driven by growth in high margin video accounts advertising revenue and margin improvement in downfall video advertising.

John: Diluted EPS was 6.014 RMB, up 55% year-on-year, outpacing non-IFRF net profit growth due to the reduced share count from the share buyback. For the second quarter of 2024, our weighted average number of shares for calculating diverted EPS decreased by 1.9% year-on-year.

John: The lucid EPS was 6.014 RMB up 55% year and year, outpacing non-Eivara economic growth due to reduced share count from share buybacks. For the second quarter of 2024, a weighted average number of shares for calculating by the lucid EPS decreased by 1.9% year and year.

Speaker Change: Diluted EPS was 6.014 RMB up 55% year-on-year, outpacing non-IFRS net profit growth due to reduced share count from share buybacks.

Speaker Change: For the second quarter of 2024, our weighted average number of shares for calculating divested EPS decreased by 1.9% year-on-year.

John: Moving on to gross margin, overall gross margin was 53%, up 6 percentage points year-on-year by segment. Value-added services gross margin was 57%, up 3 percentage points year-on-year due to improved margins in long-form redo and gains businesses, alongside our effective control of operating costs. Online advertising gross margin increased to 56%, up 7 percentage points year-on-year, primarily driven by growth in high-margin video accounts advertising revenue and margin improvement in long-form video advertising. FinTech and business services gross margin increased to 48%, up 9% at this point year-on-year.

John: Moving on to growth margins, overall growth margin was 53% up 6% year and year. By setman, value added services growth margin was 57% up 3% year and year due to improve margins in long form redo and gains businesses. Alongside our effective control of operating costs. On our advertising growth module increased to 56% up to 7% in 20 years, primarily driven by growth in high margin video accounts advertising revenue and margin improvement in downfall video advertising.

Speaker Change: Moving on to gross margin. Overall gross margin was 53%, up 6.0% year-on-year.

Speaker Change: By segment, value-added services gross margin was 57%, up 3.0% on year due to improved margins in long-form redo and gains businesses, alongside our effective control of operating costs.

Speaker Change: Online advertising gross margin increased to 56%, up 7 percentage points year-on-year, primarily driven by growth in high-margin video account advertising revenue and margin improvement in long-form video advertising.

John: Fintech and business services growth module increased to 48% up to 9 to 10 years. This was driven by enhanced cost efficiency in our crowd business, higher contribution from high margin wealth management services revenues, and e-commerce technology service fees within video accounts, and improved monetization of week home and other business services.

John: Fintech and business services growth module increased to 48% up to 9 to 10 years, this was driven by enhanced cost efficiency in our crowd business, higher contribution from high margin wealth management services revenues and e-commerce technology service fees within video accounts and improved monetization of week home and other business services. On our operating expenses, selling and marketing expenses were a 9.2 billion revenue be up 10% year and year, driven by increased spending on promotion advertising for new content release, selling and marketing expenses represented 6% of revenue stable year and year, our ND expenses were 17.3 billion revenue be up 8% year and year, GNA expenses excluding R&D were 10.2 billion revenue be up 8%, 9% year and year, usually an increase in workforce, including performance phase rewards, at quarter end we had approximately 106,000 employees up about 1% both year and year and quarter and quarter. Non-i-virus operating margin was 36% up 5% is point year and year in line with course margin expansion.

Speaker Change: FinTech and business services gross margin increased to 48% and up 9% year-on-year. This was driven by enhanced cost efficiency in our crowd business, higher contribution from high margin wealth management services revenues, and e-commerce technology service fees within video accounts.

John: This was driven by enhanced cost efficiency in our cloud business, higher contribution from high-margin wealth management services revenue, and e-commerce technology service fees within video accounts, and improved monetization of Wecom and other business services. On operating expenses, selling and marketing expenses were 9.2 billion RMB, up 10% year-on-year, driven by increased spending on promotion and advertising for new content release. Selling and marketing expenses represented 6% of revenue, stable year-on-year. R&D expenses were $17.03 billion RMB, up 8% year-on-year.

Speaker Change: and improved monetization of Wecom and other business services.

John: On our operating expenses, selling and marketing expenses were a 9.2 billion revenue be up 10% year and year, driven by increased spending on promotion advertising for new content release. Selling and marketing expenses represented 6% of revenue, stable year and year. Our ND expenses were 17.3 billion revenue be up 8% year and year. GNA expenses excluding R&D were 10.2 billion revenue be up 8%, 9% year and year, usually an increase in workforce, including performance phase rewards. At quarter end, we had approximately 106,000 employees, up about 1% both year and year and quarter and quarter. Non-i-virus operating margin was 36%, up 5% is point year and year in line with course margin expansion.

Speaker Change: On operating expenses, selling and marketing expenses were 9.2 billion RMB up 10% year-on-year driven by increased spending on promoting and advertising for new content release. Selling and marketing expenses represented 6% of revenue stable year-on-year.

Speaker Change: R&D expenses were $17.03 billion RMB up 8% year-on-year. G&A expenses excluding R&D were $10.02 billion RMB up 8-9% year-on-year due to an increase in sales force.

John: G&A expenses excluding R&D were $10.2 billion RMB, up 9% year-on-year due to an increase in the staff force, including performance-based rewards. At quarter end, we had approximately 106,000 employees, up about 1% both year-on-year and quarter-on-quarter. Non-IRS operating margin was 36%, a 5%-ish point year-on-year in line with gross margin expansion. To conclude, I will highlight some key cash flow and balance sheet metrics. Operating capex was 7.2 billion renminbi, up 144% year-on-year, driven by investment in GPU and CPU servers.

Quota AI: including performance-based rewards. At Quota AI, we had approximately 106,000 employees, up about 1% both year-on-year and quarter-on-quarter.

Speaker Change: Non-IFRS operating margin was 36%, a 5 percentage point year-on-year in line with cross-margin expansion.

John: To conclude, I will highlight some key cash flow and balance sheet metrics. Operating capacity was 7.2 billion revenue, be up 144% year and year and year, driven by investment in GPU and CPU servers. On a quarter and quarter basis, operating capacity was up 8%. Non-operating capacity was 1.5 billion revenue, be up 6% year and year, driven by construction and progress. On a quarter and quarter basis, non-operating capacity was down 80% from the high base in the prior quarter. As a result, total capacity was 8.7 billion revenue, be up 121% year and year; free cash flow was 40.4 billion revenue, be up 35% year and year, due to higher gross receipts from gains.

John: To conclude, I will highlight some key cash flow and balance sheet metrics, operating capacity was 7.2 billion revenue be up 144% year and year and year, driven by investment in GPU and CPU servers. On a quarter and quarter basis, operating capacity was up 8%. Non-operating capacity was 1.5 billion revenue be up 6% year and year, driven by construction and progress. On a quarter and quarter basis, non-operating capacity was down 80% from the high base in the prior quarter.

Speaker Change: To conclude, I will highlight some key cash flow and balance sheet metrics.

Speaker Change: Operating capex was 7.2 billion renminbi, up 144% year-on-year, driven by investment in GPU and CPU servers.

John: On a quarter-on-quarter basis, operating capex was up 8%. Non-operating capex was $1.5 billion RMB, up 63% year-on-year driven by construction in progress. Non-operating capex, or known operating capex, was down 80% from the high base in the prior quarter. As a result, total cutbacks was 8.7 billion RMB, up 121% year-on-year. Pre-cash flow was 48.4 billion RMB, up 35% year-on-year due to higher gross receipts from gains. However, on a quarter-on-quarter basis, pre-cash flow was down 22% due to a seasonal decline in gains from receipts post the Chinese New Year holiday period.

Speaker Change: On a quarter-on-quarter basis, operating capex was up 8%. Non-operating capex was 1.5 billion renminbi, up 63% year-on-year, driven by construction in progress. On a quarter-on-quarter basis, non-operating capex was...

Speaker Change: Known operating capex was down 80% from the high base in the prior quarter.

John: As a result, total capacity was 8.7 billion revenue be up 121% year and year, free cash flow was 40.4 billion revenue be up 35% year and year, due to higher gross receipts from gains. On a quarter and quarter basis, free cash flow was down 22% due to a seasonal decline in gains growth receipts post Chinese New Year holiday period. That cash position was 71.8 billion revenue be down 22% quarter and quarter, primary due to 34.2 billion revenue be share repurchased and 28.9 billion revenue be deficit payment for years. It doesn't point to make the range of water to 4.4 last year funded by our free cash flow generation.

Speaker Change: As a result, total cutbacks was 8.7 billion RMB, up 121% year-on-year.

Speaker Change: Free cash flow was 40.4 billion renminbi up 35% year-on-year

John: On a quarter and quarter basis, free cash flow was down 22% due to a seasonal decline in gains growth receipts post Chinese New Year holiday period. That cash position was 71.8 billion. Revenue be down 22% quarter and quarter, primary due to 34.2 billion revenue be share repurchased and 28.9 billion revenue be deficit payment for years. It doesn't point to make the range of water to 4.4 last year funded by our free cash flow generation.

Speaker Change: due to higher gross receipts from gains. On a quarter-on-quarter basis, pre-cash flow was down 22% due to a seasonal decline in gains gross receipts post-Chinese New Year holiday period.

Unknown Executive: The net cash position was 71.8 billion renminbi, down 22% quarter-to-quarter, primarily due to 34.2 billion renminbi share repurchase and 28.9 billion renminbi dividend payment for the year 2020 should be made green this quarter. Both were largely funded by our free cash flow generation. Thank you. Thank you, John. We are now opening up for questions. If you are dialing in by phone, a reminder, please press five to raise a question and then press six to unmute yourself. If you are accessing from the Tencent meeting or room meeting application, please click the raise hand button at the bottom.

Speaker Change: Net cash position was 71.8 billion RMB, down 22% quarter-to-quarter.

Speaker Change: Primarily due to 34.2 billion RMB share repurchase and 28.9 billion RMB dividend payment for year 2020 should we make the range in order. Both were largely funded by our free cash flow generation. Thank you.

John: Thank you.

Unknown Executive: Thank you. Thank you, John.

Unknown Executive: Thank you, John.

Unknown Executive: We now open up all the questions. If you are dialing in by phone, remember, please press five to raise a question and then press six to unmute yourself. If you are accessing from the transfer and meeting or rule meeting application, please click the raise and button at the bottom.

Unknown Executive: We now open up all the questions. If you are dialing in by phone, remember please press five to raise a question and then press six to unmute yourself. If you are accessing from the transfer and meeting or rule meeting application, please click the raise and button as at the bottom.

Unknown Executive: We will take one main question and up to one full up question each time.

Speaker Change: Thank you, John. We now open up for questions.

Speaker Change: If you are dialing in by phone, a reminder, please press 5 to raise a question and then press 6 to unmute yourself.

Speaker Change: If you are accessing from the Tencent Meeting or World Meeting application, please click the raise hand button at the bottom. We will take one-man question and up to one follow-up question each time. The first question comes from Alicia Yap from Citigroup.

Unknown Executive: We will take one main question and up to one full up question each time.

Alicia Yap: Is the first question comes from Alicia Yeh Prodigy? I am. Thank you a good name management.

Unknown Executive: We will take one question and up to one follow-up question each time. The first question comes from Alicia Yap from Citigroup. Hi, thank you.

Alicia Yap: Are the first question comes from Alicia Yeh Prodigy? I am. Thank you a good name management.

Unknown Executive: Good evening, management. Thanks for taking my questions, and congratulations on the solid results. First question, can management elaborate a little bit on your recent upgrade of the advertising technology platform? When management noted in the prepared remark that upgraded technology will analyze user interest over a longer time horizon, does that mean you are going back into the longer historical usage pattern to form more precise targeting attributes and to capture the potential change of user habits over the years? Maybe you could share a little bit of the details?

Alicia Yap: Thanks for taking my questions, and congrats on the solid result of first questions. Can management elaborate a little bit on your recent upgrade of the advertising technology platform when management noted on the preparing mark the upgraded technology will analyze the user interest over a longer time horizon. The historical usage pattern to form more precise targeting attribute and to capture the potential change of the user habits over the years. Maybe can you share a little bit of details and also how will this upgrade upgrade at platform attract higher expand and maybe support the future at revenue growth potential.

Unknown Executive: Thanks for taking my questions and congrats on the solid result of first questions can management elaborate a little bit your recent upgrade of the advertising technology platform when management noted on the preparing mark the upgraded technology will analyze the user interest over a longer time horizon. The historical usage pattern to form more precise targeting attribute and to capture the potential change of the user habits over the years. Maybe can you share a little bit of details and also how will this upgrade upgrade at platform attract higher expand and maybe support the future at revenue growth potential.

Speaker Change: Hi, thank you. Good evening, management. Thanks for taking my questions and congrats on the solid results. First question, can management elaborate a little bit on your recent upgrade of the advertising technology platform?

Unknown Executive: And also, how will this upgraded ad platform attract higher ad spend and maybe support future ad revenue growth potential? Second question, given there's a recent supportive comment from the State Council on digital content, including gaming and others, will that change any of the company R&D resource deployment in the coming future in order to help boost more entertainment-related content consumption opportunities? Thank you. Hi Alicia.

Speaker Change: When management noted on the prepared remark, the upgraded technology will analyze the user interest over a longer time horizon.

Speaker Change: Does that mean you are taking back into the longer historical usage pattern to form more precise targeting attribute and to capture the potential change of the user habits over the years? Maybe can you share a little bit of the details? And also, how will this upgraded ad platform attract higher ad spend and maybe support the future ad revenue growth potential?

Alicia Yap: Second questions, given that the reason supportive comments from the State Council on the digital content, including gaming and others, will that change any of the company are in the resource deployment in the coming future in order to help us more entertainment related content consumption opportunity. Thank you.

Unknown Executive: Second questions, given that the reason supportive comments from the state council on the digital content, including gaming and others, will that change any of the company are in the resource deployment in the coming future in order to help us more entertainment related content consumption opportunity. Thank you. Hi, Ellie.

Speaker Change: Our second question.

Speaker Change: Given there's a recent supportive comment from the State Councilor on the digital content, including gaming and others, will that change any of the company R&D resource deployment in the coming future in order to help boost more entertainment-related content consumption opportunities? Thank you.

Unknown Executive: Hi, Ellie. Thank you very much for your questions, and I'll attempt to take the first one. So yes, indeed, we are looking further back at actions over years rather than months, and the main benefit is to form a more comprehensive user interest graph. On the other hand, we're also looking with greater frequency at the most recent actions, and the main benefit of the most recent actions is to have a more precise and timely view on users' current commercial intent. And so, you know, looking further back and also looking more frequently at the most recent data are both beneficial, but for different reasons.

Unknown Executive: Thank you very much for your questions, and I'll attempt to answer the first one. So, yes, indeed, we are looking further back. The main benefit is to form a more comprehensive user interest graph. On the other hand, we're also looking with greater frequency at the most recent actions, and the main benefit of the most recent actions is to have a more precise and timely view of users' current commercial intent. And so, you know, looking further back and also looking more frequently at the most recent data are both beneficial, but for different reasons.

Unknown Executive: Thank you very much for your questions and I'll attempt to take the first one. So yes, indeed, we are looking further back at actions over years rather than months and the main benefit is to form a more comprehensive user interest graph. On the other hand, we're also looking with greater frequency at the most recent actions and the main benefit of the most recent actions is to have a more precise and timely view on users current commercial intent.

Speaker Change: actions over years rather than months. And you know, the main benefit is to form a more comprehensive user interest graph. On the other hand, we're also looking with greater frequency at the most recent.

Speaker Change: actions and the main benefit of the most recent actions is to have a more precise and timely view on users current commercial intent.

Unknown Executive: And so, you know, looking further back and also looking more frequently at the most recent data are both beneficial, but for different reasons. And in terms of how the processes then attract more advertising spend. But by understanding the user's interest graph better by having more precision around their current commercial intent, we can improve the click through rate. And today in China and worldwide, as you boost the click through rate, then the majority of advertisers automatically allocate more advertising spend to you because you're delivering more clicks with the higher click through rate.

Speaker Change: And so, you know, looking further back and also looking more frequently at the most recent data are both beneficial, but for different reasons.

Unknown Executive: And in terms of how the processes then attract more advertising spend. But by understanding the user's interest graph better, by having more precision around their current commercial intent, we can improve the click-through rate. And today in China and worldwide, as you boost the click-through rate, then the majority of advertisers automatically allocate more advertising spend to you because you're delivering more clicks with the higher click-through rate.

Unknown Executive: And in terms of how the processes then attract more advertising spend, by understanding the user's interest graph better, by having more precision around their current commercial intent, we can improve the click-through rate. And today, in China and worldwide, as you boost the click-through rate, the majority of advertisers automatically allocate more advertising spend to you because you're delivering more clicks with a higher click-through rate. In terms of your second question, I would say, obviously, the comments are actually supportive and very encouraging to us and our content business, especially the narrative around gaming, which is yet another approval and affirmation of the value of the industry in addition to the continued issuance of Banhao.

Speaker Change: and in terms of how the processes then attract more advertising spend, you know, but by

Speaker Change: understanding

Speaker Change: having more precision around their current commercial intent.

Speaker Change: we can improve the click-through rate. And, you know, today in China and worldwide, you know, as you boost the click-through rate, then the majority of advertisers automatically allocate more advertising spend to you because you're delivering more clicks with the higher click-through rate.

Unknown Executive: In terms of your second question, I would say obviously the comments are actually supportive and very encouraging to us and our content business, especially the narrative around gaming, which is yet another approval.

Unknown Executive: In terms of your second question, I would say obviously the comments is actually supportive and very encouraging to us and our content business, especially the narrative around gaming, which is yet another approval. And affirmation of the value of the industry in addition to the continued issuance on how and without this is definitely incrementally positive to the overall content industry. But haven't said that, we have already been making a very long-term investment and strategic investments in the content industry.

Speaker Change: In terms of your second question, I would say obviously the comments is actually supportive and very encouraging.

Speaker Change: to us and our content business especially the narrative around gaming which is yet another approval

Unknown Executive: And affirmation of the value of the industry in addition to the continued issuance on how and without this is definitely incrementally positive to the overall content industry. But having said that, we have already been making a very long-term investment and strategic investments in the content industry. And the nature of the content industry, be it games or be it drama series, which originates from novels, is that they are actually very long-term in nature. So if you look at the recent revival of our gaming business, as well as the success of our drama series, they really originate from investments that we made years ago.

Speaker Change: and affirmation of the value of the industry, in addition to the continued issuance of Banhao. And we felt this is definitely incrementally positive to the overall content industry.

Unknown Executive: And we felt this is definitely incrementally positive to the overall content industry. But having said that, you know, we have already been making very long-term investments and strategic investments in the content industry. And the nature of the content industry, be it games or be it drama series, which originate from novels, is that they are actually very long-term in nature. So if you look at the recent revival of our gaming business, as well as the success of our drama series, they really originate from investments that we made years ago.

Speaker Change: But having said that, you know, we have already been making very long-term investments and strategic investments in the content industry. And the nature of the content industry, be it games or be it...

Unknown Executive: And the nature of the content industry be it games or be it drama series, which originates from novels is that they are actually very long-term in nature. So if you look at the recent revival of our gaming business as well as the success of our drama series, they really originate from investments that we made years ago. So from that perspective, you know, rest assured that, you know, as a major play in the coming industry, we have been making very strategic long-term investments in the content industry even when the industry was actually in turmoil.

Speaker Change: drama series, which originate from novels, is that they are actually very long-term in nature. So, so if you look at the recent

Speaker Change: a revival of our gaming business, as well as the success of our drama series. They really originate from investments that we made years ago.

Unknown Executive: So from that perspective, you know, rest assured that, you know, as a major play in the coming industry, we have been making very strategic long-term investments in the content industry even when the industry was actually in turmoil. And that's the reason why we are now reaping the benefit to help our investments. So, you know, we are not going to be sort of, you know, that short-term oriented, just reacting to one piece of news. But, you know, as an important player, we have been making very strategic investments all along the way, and we will continue to do that.

Unknown Executive: So from that perspective, rest assured that, as a major player in the content industry, we have been making very strategic and long-term investments in the content industry, even when the industry was actually in turmoil. And that's the reason why we are now reaping the benefit of our investments. So we're not going to be that short term on the end to just reacting to one piece of news. But as an important player, we have been making very strategic investments all along the way and will continue to do that. Thank you, Alicia.

Speaker Change: So, from that perspective, you know, rest assured that, you know, as a major player in the content industry, we have been making very strategic on long term.

Speaker Change: investments in the content industry even when

Unknown Executive: And that's the reason why we are now reaping the benefit to help our investments. So, you know, we are not going to be sort of, you know, that short-term oriented just reacting to one piece of news. But, you know, as an important player, we have been making very strategic investments all along the way, and we will continue to do that. Thank you. Thank you, Alicia.

Speaker Change: The industry was actually in turmoil, and that's the reason why we are now reaping the benefit of our investments.

Speaker Change: You know, we're not going to be sort of, you know, that short-term oriented, just reacting to one piece of news, but, you know, as an important player, we have been making very strategic investments all along the way, and we'll continue to do that.

Unknown Executive: Thank you.

Unknown Executive: Thank you, Alicia.

Unknown Executive: We will take the next question from Kenneth Fong from VBS. Hi, good evening, management. Thank you for taking my question. I have two questions.

Unknown Executive: We will take the next question from California VBS. Hi, good evening management. Thank you for taking my question.

Unknown Executive: We will take the next question from California VBS. Hi, good evening management. Thank you for taking my question.

Speaker Change: Thank you.

Speaker Change: Thank you, Alicia. We will take the next question from Kenneth Fong from VBS.

Unknown Executive: The first is on live streaming e-commerce. We noticed that there was a meaningful slowdown in the GMV growth for the short video platform live streaming e-commerce for the competitor in the recent quarter. Can you manage to share with us their e-commerce strategy for our video? My second question is on the accounting side, specifically digging into two items.

Unknown Executive: I have two questions. First is on the live streaming e-commerce. We noticed that there have been a meaningful slowdown in the G&B growth in the short video platform. Nice to make e-commerce for the competitor in the recent quarter. Can management share with us the e-commerce strategy for our video accounts?

Unknown Executive: I have two questions. First is on the live streaming e-commerce. We noticed that there have been a meaningful slowdown in the G&B growth in the short video platform. Nice to make e-commerce for the competitor in the recent quarter. Can management share with us the e-commerce strategy for our video accounts?

Jennifer: Hi, good evening, management. Thank you for taking my question. I have two questions. First is on the live streaming e-commerce. We noticed that there have been a meaningful slowdown in the GMV growth in the short video platform live streaming e-commerce for the competitor in the recent quarter.

Speaker Change: Can management share with us their e-commerce strategy for our video accounts?

Unknown Executive: My second question is on the accounting side, specifically taking into two items. First of all, the G&A, which is up 8% on a year-on-year basis, and the center of the head count is rather flat-page on a year-on-year basis. So, how much of this 8% increase is one of in nature? And secondly, on tax, how do we model the effective tax rate open next to quarter? As you come down a lot in the quarter. Thank you.

Unknown Executive: My second question is on the accounting side, specifically taking into two items. First of all, the G&A, which is up 8% on a year-on-year basis, and the center of the head count is rather flat-page on a year-on-year basis. So, how much of this 8% increase is one of in nature? And secondly, on tax, how do we model the effective tax rate open next to quarter? As you come down a lot in the quarter. Thank you.

Speaker Change: My second question is on the accounting side. Specifically taking into two items. First of all, the GNA, which is up 8% on a year-on-year basis.

Unknown Executive: First of all, the G&A, which is up 8% on a year-on-year basis, can understand that the headcount is rather flattish on a year-on-year basis. So how much of this 8% increase is one-off in nature? And secondly, on tax, how should we model the effective tax break over the next two quarters, as it has come down a lot this quarter? Hi, I'll take the first question.

Speaker Change: I understand that the headcount is rather flattish on a year-on-year basis. So how much of this 8% increase is one-off in nature? And secondly, on tax, how should we model the effective tax break over the next two quarters? It has come down a lot this quarter. Thank you.

Unknown Executive: Hi, I'll take the first question. In terms of the e-commerce activity in our e-commerce industry, we have a lot of work to do. So, we have a lot of work to do. We have a lot of work to do.

Unknown Executive: Hi, I'll take the first question. In terms of the e-commerce activity in our[inaudible] In the sense that we are going to build that ecosystem, not just to base a point at the video accounts and a live streaming channel, in instead, you know, we are going to build our e-commerce ecosystem with invasion, and time to the entire invasion ecosystem, and that would obviously still try to draw a lot of strength from our official, from our video accounts as well as our live streaming channel, but at the same time, it will be connected to all the elements of the invasion ecosystem, including official accounts, including media programs, including enterprise, invasion, including all the social and group activities that are happening within invasion, so that we would want to build an ecosystem in a very patient but systematic way, so that it will be differentiated from just live streaming e-commerce, and it will be much more valuable to the merchants and the users, and we also hope to solve the problem that you are seeing, right?

Speaker Change: Hi, I'll take the first question. In terms of...

Unknown Executive: In terms of the e-commerce activity in our Weixin ecosystem, so apart from the mini programs, e-commerce, just on, you know, what you would call the live streaming e-commerce, our growth in the quarter has still been very solid, very significant growth. So we're not seeing a slowdown in terms of GME growth relative to the other short video platforms. And the main reason is because, you know, the size of our e-commerce GME is actually very small compared to the size of theirs.

Speaker Change: at the e-commerce activity in our

Speaker Change: ecosystem. So apart from the mini programs e-commerce, just on you know what you would call the live streaming e-commerce, you know our growth in the quarter has still been very solid.

Speaker Change: a very significant growth. So we're not seeing a slowdown in terms of TMA growth relative to the other

Speaker Change: short video platforms and and the main reason is because you know the the size of our

Speaker Change: ecommerce, GME is actually very small compared to the size of theirs. So, you know, there's still a lot of headroom for us to grow.

Unknown Executive: So, you know, there's still a lot of headroom for us to grow. But having said that, we have recently repositioned our live streaming e-commerce platform to make it more of a Weixin e-commerce platform system in the sense that we are going to build that ecosystem, not just to base a point on the video accounts and live streaming channel. Instead, we are going to build our e-commerce ecosystem within Weixin, connecting to the entire Weixin ecosystem.

Speaker Change: But having said that, we have recently repositioned our live-streaming e-commerce to make it more of a Weixin e-commerce.

Unknown Executive: In the sense that we are going to build that ecosystem, not just to base a point at the video accounts and a live streaming channel, in instead, you know, we are going to build our e-commerce ecosystem with invasion, and time to the entire invasion ecosystem, and that would obviously still try to draw a lot of strength from our official, from our video accounts as well as our live streaming channel, but at the same time, it will be connected to all the elements of the invasion ecosystem, including official accounts, including media programs, including enterprise, invasion, including all the social and group activities that are happening within invasion, so that we would want to build an ecosystem in a very patient but systematic way, so that it will be differentiated from just live streaming e-commerce, and it will be much more valuable to the merchants and the users, and we also hope to solve the problem that you are seeing, right?

Speaker Change: system in the sense that we are going to build that ecosystem not just to base a point at the

Speaker Change: video accounts and live streaming.

Speaker Change: channel. Instead, we are going to build our e-commerce ecosystem within Weixin.

Speaker Change: tying to the entire WeChat ecosystem. And that would obviously still draw a lot of strength from our video accounts as well as our live streaming.

Unknown Executive: And that would obviously still draw a lot of strength from our video accounts as well as our live streaming channel. But at the same time, it will be connected to all the elements of the Weixin ecosystem, including official accounts, including mini programs, including enterprise Weixin, including all the social and group activities that are happening within Weixin, so we would want to build an ecosystem in a very patient but systematic way so that it will be differentiated from just live streaming e-commerce.

Speaker Change: channel, but at the same time, it will be connected to all the elements of the Weixin ecosystem, including official accounts, including mini programs.

Speaker Change: including enterprise, including all the social.

Speaker Change: and group activities that are happening within Weixin.

Speaker Change: So that we would want to build.

Speaker Change: ecosystem in a very patient but systematic way.

Unknown Executive: And it will be much more valuable to the merchants and the users. And we also hope to solve the problem that you are seeing right now. There's a material slowdown in terms of GMV growth because live streaming e-commerce can grow very fast, but then there is a natural slimming. But if we can build the eCommerce ecosystem within Weixin in a systematic way, leveraging all the sources of strength within Weixin, then, you know, hopefully, we can actually build a much bigger and meaningful and, you know, high ceiling e-commerce ecosystem.

Speaker Change: so that it will be differentiated from just live streaming e-commerce.

Speaker Change: and it will be much more valuable to the merchants and the users.

Speaker Change: And we also hope to solve the problem that you are seeing right now. There's a material slowdown in terms of GMV growth because live streaming e-commerce can grow very fast, but then there is a natural slimming. But if we can build the.

Unknown Executive: You know, there's a material slowdown in terms of GMD growth, because live streaming e-commerce can grow very fast, but then there is a natural slimming. But if we can build the e-commerce ecosystem with invasion in the systematic way, leveraging all the source of strength with invasion, then, you know, hopefully we can actually build much bigger and meaningful way. And, you know, high ceiling e-commerce ecosystem. And to some extent, this is similar to the way we build our mini-programs. You know, for quite a few years, we built the ecosystem patiently, you know, and it doesn't seem like it's generating a lot of revenue. But when it actually unleashes power, it generates a lot of user engagement, and then it becomes extremely valuable to merchants and content providers online and offline, and it becomes a significant source of revenue in many different areas, including mini games as well.

Unknown Executive: You know, there's a material slowdown in terms of GMD growth, because live streaming e-commerce can grow very fast, but then there is a natural slimming, but if we can build the e-commerce ecosystem with invasion in the systematic way, leveraging all the source of strength with invasion, then, you know, hopefully we can actually build much bigger and meaningful way. And, you know, high ceiling e-commerce ecosystem. And to some extent, this is similar to the way we build our mini-programs, you know, for quite a few years, we built the ecosystem patiently, you know, and it doesn't seem like it's generating a lot of revenue, but when it actually unleashes power, it generates a lot of user engagement, and then it becomes extremely valuable to merchants and content providers online and offline, and it becomes a significant source of revenue in many different areas, including mini games as well. So that's, you know, the way we approach, you know, the waste in e-commerce.

Speaker Change: e-commerce ecosystem within Weixin in the systematic way, leveraging all the sources of strength within Weixin, then, you know, hopefully we can actually build much bigger and meaningful and, you know, high ceiling.

Unknown Executive: And to some extent, this is similar to the way we built our mini programs. For quite a few years, we built the ecosystem patiently, you know, and it doesn't seem like it's generating a lot of revenue. But when it actually unleashes power, it generates a lot of user engagement, it becomes extremely valuable to merchants and content providers online and offline. And it has become a significant source of revenue in many different areas, including mini games as well.

Speaker Change: ecommerce ecosystem. And to some extent, this is similar to the way we build our mini programs, you know, for

Speaker Change: quite a few years, we built the ecosystem patiently, you know, and it doesn't seem like it's generating a lot of revenue. But when it actually unleashes power, it generates a lot of

Speaker Change: user engagement, it becomes extremely valuable to merchants and content providers online and offline, and it becomes a significant source of revenue in many different areas including minigames as well.

Unknown Executive: So that's the way we approach Western e-commerce. In relation to G&A expenses, I will split them into two parts to explain. R&D expenses increased by 8% year-on-year in Q2, while G&A excluding R&D increased by about 8-9% also year-on-year in Q2, 2024.

Unknown Executive: So that's, you know, the way we approach, you know, the waste in e-commerce.

Speaker Change: So that's, you know, the way we, you know, approach, you know, ways to do e-commerce.

Unknown Executive: In relation to GNA expenses, I will speak into two plus to explain. R&D expenses increased by 8% year and year equal to, well, GNA extruding R&D increased by about 89% also year and year equal to 2024. In 2024, in 2024, we expect R&D to increase by high single digit while GNA extruding R&D also will increase by single digit as well on IFRS spaces. So, as a result, we expect that, you know, for the full year of 2024, year based on the latest estimates, it will increase by high single digit as well.

Unknown Executive: In relation to GNA expenses, I will speak into two plus to explain. R&D expenses increased by 8% year and year equal to, well, GNA extruding R&D increased by about 89% also year and year equal to 2024. In 2024, in 2024, we expect R&D to increase by high single digit while GNA extruding R&D also will increase by single digit as well on IFRS spaces. So as a result, we expect that, you know, for the full year of 2024, year based on the latest estimates, it will increase by high single digit as well.

Speaker Change: In relation to G&A expenses, I will split it into two parts to explain. R&D expenses increased by 8% year-on-year in Q2, while G&A excluding R&D increased by about 8-9% also year-on-year in Q2, 2024.

Unknown Executive: In the whole of 2024, we expect R&D to increase by a high single digit, while G&A excluding R&D will also increase by a single digit on an IFRS basis. So as a result, we expect that, you know, for the full year of 2024, based on the latest estimate, it will increase by a high single digit as well. In relation to income tax, the non-IFRS, we should really look at the non-IFRS profits, you know. We can see that the decrease in income tax expense was due to deferred tax.

Speaker Change: In the whole of 2024, we expect R&D to increase by high single-digit while G&A excluding R&D also will be increased by single-digit as well on IFRS basis.

Speaker Change: So, as a result, we expect that, you know, for the full year of 2024, based on the latest estimate, it will increase by a high single digit as well.

Unknown Executive: In relation to the income tax, the known IFRS, we should really look at the known IFRS property. We can see that the decrease in income tax expense was due to different types as that reversal in overseas subsidiary in Q2 last year, which form a lower base for this year comparison. And it was, of course, offset by the increase by a domestic income tax. The known IFRS effective tax rate for last year, full year was 22%, and we expect that the known IFRS effective tax rate for 2024 will be within the range of 18 to 20%.

Unknown Executive: In relation to the income tax, the known IFRS, we should really look at the known IFRS property. We can see that the decrease in income tax expense was due to different types as that reversal in overseas subsidiary in Q2 last year, which form a lower base for this year comparison. And it was, of course, offset by the increase by a domestic income tax. The known IFRS effective tax rate for last year, full year was 22%, and we expect that the known IFRS effective tax rate for 2024 will be within the range of 18 to 20%.

Speaker Change: In relation to the income tax, the non-IFRS, we should really look at the non-IFRS profits, you know

Speaker Change: We can see that the decrease in income tax expense was due to deferred tax.

Unknown Executive: Asset Reversal in OVC subsidiary in Q2 last year, which formed a lower base for this year's comparison. And it was, of course, offset by the increase in domestic income tax. The non-IRS effective tax rate for last year, full year, was 22%.

Speaker Change: asset reversal in OVC subsidiary in Q2 last year, which formed a lower base for this year comparison. And it was, of course, offset by the increase by a domestic income tax.

Speaker Change: The non-IRS effective tax rate for last year, full year, was 22 percent and we expect that the non-IRS effective tax rate for 2024 will be within the range of 18 to 20 percent.

Unknown Executive: And we expect that the non-IRS effective tax rate for 2024 will be within the range of 18% to 20%. Thank you very much. Next is a question from Miranda Tsang from the Center for International Studies. Oh, maybe we'll just take the. Okay, Miranda, thank you. Maybe we can move to the next question. Yes, I can hear you.

Unknown Executive: Thank you. Thank you very much.

Unknown Executive: Next, the question from Robin Zhu. Thank you very much. Okay. Okay, Miranda, thank you.

Speaker Change: Thank you. Thank you very much.

Unknown Executive: Next, the question from Robin Zhu. Thank you very much. Okay. Okay, Miranda, thank you.

Speaker Change: Next is a question from Miranda Tsang from Vancouver.

Speaker Change: Thank you.

Speaker Change: James Mitchell, John

Speaker Change: James Mitchell, John

Speaker Change: So, I'll finish with it.

Speaker Change: Take the

Unknown Executive: Maybe we move to the next question. Yes, I can hear you. Okay. Thank you. Thank you for the patience.

Speaker Change: Okay, Miranda, can you hear us?

Unknown Executive: Okay, thank you. Thank you. Thank you for your patience.

Speaker Change: Maybe we move to the next question.

Miranda Tsang: Yes, I can hear you now. Okay, thank you. Go ahead. Thank you. Thanks for the patience. So, my questions are about the profit. My key question is about, so the new higher margin revenue streams have been driving a strong profit beat for the several quarters. Can management update us about matrix of these higher margin streams? For example, what are the mix for them in revenue or gross profit?

Unknown Executive: So my questions are about the topic. My key question is about. So the new higher margin revenue streams have been driving a strong process bit for the several quarters. Can management update us about the matrix of these higher margin stream? For example, what are the mix from them in revenue or growth profit? How fast are they growing? How much do they contribute to the growth process growth rate? And then looking ahead, how to think about the room for further upside to your growth market? What are the margins of the key business segments?

Unknown Executive: So my questions are about profit. My key question is: so the new higher-margin revenue streams have been driving a strong profit beat for several quarters. Can management update us about the matrix of these higher-margin streams? For example, what is their mix for them in revenue or gross profits? How fast are they growing?

Unknown Executive: Maybe we move to the next question. Yes, I can hear you. Okay. Thank you. Thank you for the patience. So my questions are about the topic. My key question is about. So the new higher margin revenue streams have been driving a strong process bit for the several quarters. Can management update us about matrix of these higher margin stream? For example, what are the mix from them in revenue or growth profit? How fast are they growing?

Unknown Executive: How much do they contribute to the growth process growth rate? And then looking ahead, how to think about the room of further upside to your growth market? What are the margins of the key business segments? And then my full up question about the profit is that we have seen that the share of profit from associates and JV increase significantly quarter quarter and also here with year. Contributing to a significant portion of companies adjusted profit.

Miranda Tsang: How fast are they growing? How much do they contribute to the gross profit growth rate? And then looking ahead, how to think about the room of further upside to your gross margins of the key business segments?

Unknown Executive: How much do they contribute to the gross profit growth rate? And then, looking ahead, how should you think about the room for further upside to your gross margins for the key business segments? And then my follow-up question about the profit is that we have seen that the share of profit from associates and JVs increased significantly quarter over quarter and also year over year, contributing to a significant portion of the company's adjusted profit. So can management help us understand what the drivers are? And then, as your investors are generally in a profit improving trend, I'm sure we expect this line item to contribute to more profit upside and to continue to trend upward going forward. Thank you. Hi Miranda.

Unknown Executive: And then my full up question about the profit is that we have seen that the share of profit from associates and JV increase significantly quarter quarter and also here with year. Contributing to a significant portion of companies' adjusted profit. So can management help us understand what are the drivers? And then, as your investors are generally in a profit-improving trend. I'm sure we expect this line item to contribute to more profit upside and continue to trend up going forward.

Miranda Tsang: And then my follow-up question about the profit is...

Speaker Change: That we have seen that the share of profit from associates and JVs

Speaker Change: increased significantly quarter over quarter and also year over year contributing to a significant portion of companies adjusted profit.

Unknown Executive: So can management help us understand what are the drivers? And then as your investors are generally in a profit improving trends. I'm sure we expect this line item to contribute to more profit upside and continue to trend up going forward.

Kim Management: So can management help us understand what are the drivers?

Speaker Change: And then as your investees are generally in a profit-improving trend, I'm sure we expect this line item to contribute to more profit upside and to continue to trend up going forward. Thank you.

Unknown Executive: Thank you.

Miranda: I'm Miranda. Thank you for the questions. I'll take the first one in terms of the impact of the mix shift toward higher margin revenue streams. So we don't quantify each one of them individually or the aggregate collectively. But one way of visualizing the trend is that, in recent periods, our growth profit has grown 2.x times as fast as our revenue. And that's been for kind of two reasons. The primary reason has been the mix shift toward these high-margin revenue streams that you talked about. And then the secondary reason has been efficiency initiatives, cost management initiatives.

Unknown Executive: Thank you for the questions. I'll take the first one in terms of the impact of the mixed shift toward higher-margin revenue streams. So, you know, we don't quantify each one of them individually or the aggregate collectively. But, you know, one way of visualizing the trend is that, in recent periods, gross profit has grown two point X times as fast as our revenue. And, you know, that's been for two reasons.

Unknown Executive: Thank you. I'm Miranda. Thank you for the questions. I'll take the first one in terms of the impact of the mix shift toward higher margin revenue streams. So we don't quantify each one of them individually or the aggregate collectively. But one way of visualizing the trend is that in recent periods, our growth profit has grown 2.x times as fast as our revenue. And that's been for kind of two reasons. The primary reason has been the mix shift toward these high margin revenue streams that you talked about.

Speaker Change: Hi Miranda, thank you for the questions. I'll take the first one in terms of the

Speaker Change: impact of the mixed shift toward higher margin revenue streams. So, you know, we don't, you know, quantify each one of them individually or, you know, the aggregate collectively.

Unknown Executive: And then the secondary reason has been efficiency initiatives, cost management initiatives. And together, those have resulted in the multiplier from. Revenue Growth to 2.X. Times Fast and Gross Profit Growth. Looking forward, then we do assume at some point some of the efficiency initiatives will yield to the efficiencies that we sought to capture. And therefore that driver of gross profit growth exceeding multi-time revenue growth will decelerate. On the other hand, we believe that the mixed shift to higher margin revenue streams is a phenomenon that has in many years to run. And therefore, we think that our gross profit will continue to increase faster than our revenue, but potentially at a 1.X. Times multiplier, rather than at a 2.X. Times multiplier looking forward.

Speaker Change: But, you know, one way of visualizing the trend is that in recent periods our gross profit has grown 2.x times as fast as our revenue.

Unknown Executive: The primary reason has been the mixed shift toward these higher-margin revenue streams that you talked about. And then the secondary reason has been efficiency initiatives, cost management initiatives, and you know together those have resulted in the multiplier from revenue growth to 2.x times faster gross profit growth. Looking forward, then we do assume that at some point some of the efficiency initiatives will have yielded the efficiencies that we sought to capture.

Speaker Change: And, you know, that's been for, you know, two reasons. The primary reason has been, you know, the mixed shift toward these higher margin revenue streams that you talked about.

Speaker Change: And then the secondary reason has been efficiency initiatives, cost management initiatives, and together those have resulted in the multiplier from

Miranda: And together, those have resulted in the multiplier from. Revenue growth to 2.X. Times Fast and Gross Profit Growth. Looking forward, then we do assume at some point some of the efficiency initiatives will yield to the efficiencies that we sought to capture. And therefore, that driver of gross profit growth exceeding multi-time revenue growth will decelerate. On the other hand, we believe that the mixed shift to higher margin revenue streams is a phenomenon that has in many years to run. And therefore, we think that our gross profit will continue to increase faster than our revenue, but potentially at a 1.X.

Speaker Change: revenue growth to 2.x times faster gross profit growth.

Speaker Change: Looking forward, then we do assume at some point some of the efficiency initiatives will have yielded the efficiencies that we sought to capture.

Unknown Executive: And therefore, that driver of gross profit growth exceeding multiplying revenue growth will decelerate. On the other hand, we believe that the mixed shift to higher-margin revenue streams is a phenomenon that has many years to run. Therefore, we think that our gross profit will continue to increase faster than our revenue, but potentially at a 1.x times multiplier rather than at a 2.x times multiplier looking forward. Thank you.

Speaker Change: and therefore that driver of gross profit growth exceeding multiplying revenue growth will decelerate.

Speaker Change: On the other hand...

Speaker Change: We believe that the mixed shift to higher margin revenue streams

Speaker Change: There's a phenomenon that has many years to run.

Speaker Change: and therefore we think that our gross profit will continue to increase faster than our revenue but potentially at a 1.x times multiplier rather than at a 2.x times multiplier looking forward. Thank you.

Miranda: Times multiplier, rather than at a 2.X. Times multiplier looking forward.

Miranda: Thank you. Yeah, in terms of the share of profit of associates, on an on gap basis, it increased from 3.9 billion a year ago to 9.9 billion due to contribution from associates like PDD and, to less extent, quite sure and epic.

Unknown Executive: Yeah, in terms of the share of profit of associates, on a no gap basis, it increased from 3.9 billion a year ago to 9.9 billion due to contribution from associates like PDD and, to a lesser extent, Kuaishou and Epic. As the share of associate profits started to pick up from the quarter to 2023 and further accelerated in the later quarters of 2023, due to the rule of large numbers, we expect that the year-on-year growth will reduce to a lower level in the second half of the year. Thank you. Next, we're going to take questions from Ronald Kong from Goldman Sachs. Thank you Pony, Martin, James, John, and Wendy.

Unknown Executive: Thank you. Yeah, in terms of the share of profit of associates, on and on gap basis, it increased from 3.9 billion a year ago to 9.9 billion due to contribution from associates like PDD and to less extent, quite sure and epic. As a share of associates, profit started to pick up from quarter to 2023 and third as they are either in the later quarters of 2023 to the root of last numbers.

Speaker Change: In terms of the share of profit of associates, on a non-gap basis, it increased from $3.9 billion a year ago to $9.9 billion due to contributions from associates like PDD and to a lesser extent Kuaishou and Epic.

Miranda: As a share of associates, profit started to pick up from quarter to 2023 and third as they are either in the later quarters of 2023 to the root of last numbers.

Speaker Change: As the share of associate profits started to pick up from Q2 2023 and further accelerated in the later quarters of 2023, due to the rule of large numbers, we expect that the year-on-year growth will reduce to a lower level in the second half of the year.

Miranda: We expect that the year on year ago will reduce to a lower level in the second half of the year. Thank you.

Unknown Executive: We expect that the year on year ago will reduce to a lower level in the second half of the year. Thank you.

Unknown Executive: Next, we will take the question from Rana Khan from Goldman Sachs. Thank you, Tony Martin, James John, and Wendy. Once I ask two questions: one is on games that are very big contrast versus last year. This year we're seeing your reacceleration and domestic international games. How do we want to manage and smooth this very strong trend that we're seeing recently?

Rana Khan: Next, we will take the question from Rana Khan from Goldman Sachs. Thank you, Tony Martin, James John and Wendy.

Speaker Change: Thank you. Next we will take the questions from Rana Khan from Goldman Sachs.

Unknown Executive: I want to ask two questions. One is about games, a very big contrast versus last year. This year we're seeing your re-acceleration in domestic and international games, your proactive adjusted evergreen existing games, the launch of new titles, and then strong supercell grossing. So how are we planning ahead, I think, to maybe partially smooth this hyper-growth trends that we're seeing in the gross receipts momentum for investors to see this into a sustained multi-year games revenue growth, just looking at it from a overall portfolio basis?

Unknown Executive: Once I ask two questions, one is on games that are very big contrast versus last year. This year we're seeing your reacceleration and domestic international games. How do we want to manage and smooth this very strong trend that we're seeing recently?

Rana Khan: Thank you Pony, Martin, James, John and Wendy. I want to ask two questions. One is on games. That very big contrast versus last year. This year we're seeing your re-acceleration in domestic and international games. You're proactive, adjusted, evergreen, existing games, launch of new titles and then strong.

Speaker Change: Supercell Grossing. So how are we planning ahead, I think, to smooth, maybe partially smooth this hyper growth trends that we're seeing in the gross receipts momentum for investors to see this into a sustained multi-year gains revenue growth, just looking at it from an overall portfolio basis, how do we want to manage and smooth this very strong trend that we're seeing recently. Second, on the investment portfolio, as we talked about, this will be a self-sustaining portfolio for the time being.

Unknown Executive: How do we want to manage and smooth these very strong trends that we're seeing recently? Second, on the investment portfolio, as we talked about, this will be a self-sustaining portfolio for the time being. What are the likely methods of divestment for mature, more mature assets?

Unknown Executive: Second, on the investment portfolio, as we talked about, this would be a self-sustaining portfolio for the time being. What are the likely methods of divestments for mature? We're more mature at that. Some may not be large enough to distribute, or some may not be that liquid to sell.

Unknown Executive: Second, on the investment portfolio, as we talked about, this would be a self-sustaining portfolio for the time being. What are the likely methods of divestments for mature? We're more mature at that. Some may not be larger enough to distribute or some may not be that liquid to sell.

Speaker Change: What are the likely methods of divestment for more mature assets? Some may not be large enough to distribute or some may not be that liquid to sell. How are we thinking on the methods of divestment and then what are the new areas of investment that we are working on? Thank you.

Unknown Executive: Some may not be large enough to distribute, or some may not be that liquid to sell. How are we thinking about the methods of divestment, and then what are the new areas of investment that we are working on? So starting with the second question, if you look at the second quarter of this year, then divestitures were substantially in excess of our gross new investments. So if you take divestitures plus dividends received, plus fund distributions received, then that was over 50% greater than the capital we deployed in new investments. So the portfolio is indeed self-funding.

Unknown Executive: How are we thinking on the methods of the investment and then what are the new areas of investment that we are working on? Thank you. So starting with the second question, if you look at the second quarter of this year, then divestitures were substantially in excess of our gross new investments. So if you take divestitures plus dividends received plus fund distributions received, then that was over 50% greater than the capital we deployed in new investments. So the portfolio is indeed self-funding. In terms of our ability to conduct divestitures, then... The majority of our portfolio value is in listed companies, and much of it is in relatively large and liquid listed securities.

Unknown Executive: How are we thinking on the methods of the investment and then what are the new areas of investment that we are working on? Thank you. So starting with the second question, if you look at the second quarter of this year, then divestitures were substantially in excess of our gross new investments. So if you take divestitures plus dividends received plus fund distributions received, then that was over 50% greater than the capital we deployed in new investments. So the portfolio is indeed self-funding.

Speaker Change: Hi, so starting with the second question, if you look at the the second quarter of this year, then divestitures were substantially in excess of our gross new investments. So if you take

Speaker Change: You know, divestitures plus dividends received, plus fund distributions received.

Speaker Change: then that was over 50% greater than the capital we deployed in new investments. So the portfolio is indeed self-funding. In terms of our ability to conduct divestitures, then

Unknown Executive: In terms of our ability to conduct divestitures, then, the majority of our portfolio value is in listed companies, and much of it is in, you know, relatively large and liquid listed securities. And so in the second quarter, we divested well over a billion dollars by selling shares on the market. And, you know, I think that trend can continue. On the first question about games. So, you know, we don't aspire to smooth out, or gain gain gross receipts growth necessarily.

Unknown Executive: In terms of our ability to conduct divestitures, then... The majority of our portfolio value is in listed companies, and much of it is in relatively large and liquid listed securities. And so in the second quarter, we divested well over a billion dollars by selling shares on the market, and I think that trend can continue.

Speaker Change: The majority of our portfolio value is in listed companies and

Speaker Change: Much of it is in relatively large and liquid listed securities.

Unknown Executive: And so in the second quarter, we divested well over a billion dollars by selling shares on the market, and I think that trend can continue.

Speaker Change: And so in the second quarter, we divested well over a billion dollars by selling shares on the market and I think that trend can continue.

Unknown Executive: On the first question about games.

James Mitchell: On the first question about games. So we don't aspire to smooth out our game gross receipts growth necessarily. And from a reported perspective, our financial results smoothed themselves out because we defer the gross receipts into our profit and loss in some cases over the course of several years. And so that in and of itself exerts a naturally smoothing ability. But that's an accounting assess whether it's not a business choice on our part.

Unknown Executive: So we don't aspire to smooth out our game gross receipts growth necessarily. And from a reported perspective, our financial results smoothed themselves out because we defer the gross receipts into our profit and loss in some cases over the course of several years. And so that in and of itself exerts a naturally smoothing ability.

Speaker Change: On the first question about games, so we don't aspire to smooth out

Unknown Executive: And from a reported perspective, our financial results smooth themselves out because we defer the gross receipts into our profit and loss, in some cases, over the course of several years. And so, you know, that in and of itself exerts a naturally smoothing ability. But you know, that's an accounting necessity. It's not a business choice on our part.

Speaker Change: are game gross receipts growth necessarily and you know from a reported perspective our financial results

Speaker Change: smooth themselves out because we defer the gross receipts into our profit and loss.

Speaker Change: in some cases over the course of several years. And so that in and of itself exerts a naturally smoothing ability, but that's an accounting necessity. It's not a business choice on our part.

Unknown Executive: But that's an accounting assess whether it's not a business choice on our part. But I think in terms of the underlying question, behind your question, that we are experiencing a step up because of Dungeon and Fighter Mobile. And so, how do we sustain the underlying step up? I'd make a few points. Mine is that Dungeon and Fighter Mobile is one contributor, but we also have other contributors. If you look clearly at the China revenue, then 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.

Unknown Executive: But you know, I think in terms of the underlying question behind your question, that you know, we are experiencing a step up because of Dungeon Fighter Mobile. And so how do we sustain the underlying step up? I'd make a few points.

James Mitchell: But I think in terms of the underlying question, behind your question, that we are experiencing a step up because of Dungeon and Fighter Mobile. And so how do we sustain the underlying step up? I'd make a few points. Mine is that Dungeon and Fighter Mobile is one contributor, but we also have other contributors. If you look clearly at the China Revenue, then 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.

Speaker Change: But, you know, I think in terms of the underlying question behind your question, that you know what we are experiencing a step up because of Dungeon and Fighter Mobile and so how do we sustain the underlying step up? I'd make a few points, line is, but...

Unknown Executive: One is that, you know, Dungeon Fighter Mobile is one contributor, but we also had other contributors. You know, if you look purely at Chinese revenue, then 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. So it's not DNF Mobile in isolation.

Speaker Change: In a dungeon and fight a mobile is one contributor, but we also had other contributors, you know, if you look purely at the China revenue, then actually the launch of Valorant in China contributed almost as much to our year on year revenue growth as the launch of

Unknown Executive: So it's not DNF mobile in isolation. And then looking forward, we have rebooting that we've done with two of our biggest games that we talked about, yielding positive results this quarter, which we expect to continue yielding positive results going forward as those two big games become more and more platform-like. And the injection of new game modes, such as Metro Royale or Extraction Shooter, into those platforms drives further user and gross receipts growth. We have the ongoing growth that we've talked about in some of our newer evergreen games, such as League of Legends: Wild Rift. We have a team and a fight for the Golden Spatula.

James Mitchell: So it's not DNF Mobile in isolation. And then looking forward, we have rebooting that we've done with two of our biggest games that we talked about, yielding positive results this quarter, which we expect to continue yielding positive results going forward as those two big games become more and more platform-like. And the injection of new game modes, such as Metro Royale or Extraction Shooter into those platforms drives further user and gross receipts growth.

Speaker Change: DNF Mobile this quarter.

Speaker Change: So it's not DNF mobile in isolation. And then, you know, looking forward we have the rebooting that we've done with two of our biggest games that we talked about.

Unknown Executive: And then, you know, looking forward, we have the rebooting that we've done with two of our biggest games that we talked about yielding positive results this quarter, which we expect to continue yielding positive results going forward as those two big games become more and more platform-like, and the injection of new game modes, such as Metro Royale or Extraction Shooter, into those platforms drives further user and gross receipts growth. We have the ongoing growth that we've talked about in some of our newer, evergreen games, such as League of Legends Wild Rift and Fight for the Golden Spatula.

Speaker Change: yielding positive results this quarter, which we expect to continue yielding positive results going forward as those two big games become more and more platform-like and the injection of new game modes.

Speaker Change: such as Metro Royale or Extraction Shooter into those platforms drives further user and gross receipts growth. We have the ongoing growth that we've talked about in some of our newer evergreen games such as League of Legends Wild Rift.

James Mitchell: We have the ongoing growth that we've talked about in some of our newer evergreen games, such as League of Legends Wild Rift. We have a team and a fight for the Golden Spatula. And then of course, we have a number of games in the pipeline that we're optimistic about, whether that's a Delta Force or a part of XR2 or a one-piece that we believe have the potential to become evergreen games in their own right going forward as well.

Speaker Change: We have a fight for the Golden Spatula.

Unknown Executive: And then, of course, we have a number of games in the pipeline that we're optimistic about, whether that's a Delta Force or a part of XR2 or a one-piece that we believe have the potential to become evergreen games in their own right going forward as well. So that's how we think about in driving continued growth for our game business over the long term. Yeah, I would just add to that and basically saying we did have a good quarter, and the traction is actually quite nice.

Unknown Executive: And then, of course, we have a number of games in the pipeline that we're optimistic about, whether that's Delta Force or Path of Exile 2 or One Piece that we believe have the potential to become evergreen games in their own right going forward as well. So that's how we think about driving continued growth for our game business over the long term. Yeah, I would just add to that and basically say, yeah, we did have a good quarter, and the traction is actually quite nice.

Speaker Change: And then, of course, we have a number of games in the pipeline that we're optimistic about, you know, whether that's, you know, a Delta Force or a Path of Exile 2 or One Piece.

Speaker Change: that we believe have the potential to become evergreen games in their own right going forward as well. So that's how we think about driving continued growth for our game business over the long term.

Martin James: So that's how we think about in a driving continued growth for our game business over the long term. Yeah, I would just add to that and basically saying, we did have a good quarter and the traction is actually quite nice. But let's not lose sight of the fact that we have seen very challenging business environment in the past couple of years. And that's really the nature of the gaming business, which is number one, it's increasingly difficult to come up with the very successful new titles because the quality of the game and the expectation of the gamers are very high.

Speaker Change: Yeah, I would just add to that and basically say,

Unknown Executive: But you know, let's not lose sight of the fact that we have seen a very challenging business environment in the past couple of years, and... You know, that's really the nature of the gaming business, right? Number one, it's increasingly difficult to come up with very successful new titles these days because the quality of the games and the expectations of the gamers are very high. And at the same time, the quality and the franchise value of existing titles are very strong. So, if you want to launch a new game, you actually have to come up with really good quality or very differentiated gameplay in order to attract users.

Speaker Change: a good quarter. And the traction is actually quite nice. But you know, let's not lose sight of the fact that we have seen very challenging business environment in the past couple of years.

Unknown Executive: But let's not lose sight of the fact that we have seen a very challenging business environment in the past couple of years. And that's really the nature of the gaming business, which is number one, it's increasingly difficult to come up with the very successful new titles because the quality of the game and the expectation of the gamers are very high. And at the same time, the quality and the franchise value of existing titles are very strong so that if you want to launch a new game, you actually have to come up with really good quality or very differentiated gameplay in order to attract users.

Martin James: And at the same time, the quality and the franchise value of existing titles are very strong so that if you want to launch a new game, you actually have to come up with really good quality or very differentiated gameplay in order to attract users, and as such, you know, we just need to work very hard to come up with good new titles. While at the same time, you know, we do think that existing franchises are actually becoming more and more sustainable.

Speaker Change: and...

Speaker Change: Yeah, that's really the nature of the gaming business, right, which is.

Speaker Change: Number one, it's increasingly difficult to come up with very successful new titles these days because the quality of the game.

Speaker Change: and the expectation of the gamers is very high. And at the same time, the quality and the franchise value of existing titles are very strong. So that if you want to launch a new game, you actually have to come up with really good quality or very differentiated gameplay in order to attract users.

Unknown Executive: and as such, you know, we just need to work very hard to come up with good new titles. While at the same time, you know, we do think that existing franchises are actually becoming more and more sustainable. But having said that, you know, in order to grow existing franchises, we also have to keep on innovating. And as a result, getting our users excited. And overall, I would say the gaming industry is still have got a lot of potential, but then it's to some extent cyclical because, you know, when there's a drift in innovation or new supply or new excitement, then, you know, it seems to be in doldrum.

Unknown Executive: And as such, you know, we just need to work very hard to come up with good new titles, while at the same time, you know, we do think that existing franchises are actually becoming more and more sustainable. But having said that, you know, in order to grow existing franchises, we also have to keep on innovating. And as a result, getting our users excited. And overall, I would say the gaming industry still has got a lot of potential, but it's to some extent cyclical, because you know, when there is a dearth of innovation or new supply or new excitement, then you know, it seems to be in the doldrums.

Speaker Change: And as such.

Speaker Change: You know, we just need to work very hard to come up with good new titles.

Speaker Change: While at the same time we do think that existing franchises are actually becoming more and more sustainable, but having said that, in order to grow existing franchises we also have to keep on innovating.

Martin James: But having said that, you know, in order to grow existing franchises, we also have to keep on innovating. And as a result, getting our users excited. And overall, I would say the gaming industry is still have got a lot of potential, but then it's to some extent cyclical because, you know, when there's a drift in innovation or new supply or new excitement, then, you know, it seems to be in doldrum. And then when there is a new wave of innovation, then, you know, the gaming business suddenly sort of new and the industry doesn't expect, right?

Speaker Change: And as a result, getting our users.

Speaker Change: Excited.

Speaker Change: And overall, I would say the gaming industry is still have got a lot of potential, but then it's to some extent cyclical because, you know, when there is a dearth in innovation or new supply or new excitement, then...

Unknown Executive: And then when there is a new wave of innovation, then, you know, the gaming business suddenly sort of new and the industry doesn't expect, right? And we just, you have to continue to work very, very hard in order to drive innovation. And we felt if we can do that, we can actually grow this business over a longer period of time. But, you know, ourselves, as well as investors, probably need to recognize that fact that, you know, there's going to be some cyclicality in the gaming business. You know, when, when there's smaller years, when there's less innovation, then it grows less. You know, when there's sort of, you know, some big emergence of innovation, then it will grow faster.

Speaker Change: You know, it seems to be in doldrums. And then when there is a new wave of innovation...

Unknown Executive: And then when there is a new wave of innovation, then, you know, the gaming business suddenly sort of, you know, and the industry suddenly expands, right, you know, and we just have to continue to work very, very hard in order to drive innovation. And we feel that if we can do that, we can actually grow this business over a longer period of time. But, you know, ourselves as well as investors probably need to recognize the fact that, you know, there's going to be some cyclicality in the gaming business. You know, when there are smaller years when there's less innovation, then it grows less new when there's sort of, you know, suddenly a big emergence of innovation, and it will grow fast. All right.

Speaker Change: then, you know, the gaming business suddenly sort of, you know, and the industry suddenly expands, right, you know, and we just, you know, have to, you know, continue to work very, very hard.

Martin James: And we just, you have to continue to work very, very hard in order to drive innovation. And we felt if we can do that, we can actually grow this business over a longer period of time. But, you know, ourselves, as well as investors, probably need to recognize that fact that, you know, there's going to be some cyclicality in the gaming business. You know, when, when there's smaller years, when there's less innovation, then it grows less, you know, when there's sort of, you know, some big emergence of innovation, then it will grow faster.

Speaker Change: in order to drive innovation. And we felt if we can do that, we can actually grow this business over a longer period of time. But, you know.

Speaker Change: ourselves as well as investors probably need to recognize that fact that you know there's gonna be some cyclicality in the gaming business you know when when there's smaller years when there's less innovation then it grows less new when there's sort of you know suddenly a big

Speaker Change: emergence of innovation, then it will grow faster.

Unknown Executive: All right.

Unknown Executive: Thank you, Martin and James. Thank you. We will take the next question from Ellie Jiang from Macquarie. Thank you so much, management, for taking my questions. I'll add two.

Unknown Executive: Thank you, Martin and James.

Unknown Executive: All right. Thank you, Martin and James. Thank you.

Unknown Executive: Thank you. We will take the next question from Ali John from Corey. Thank you so much, management, for taking my questions. I have to, number one, is really on the advertising segment. So, second quarter, we've been the birth 19 percent growth seems much more resilient versus the prior expectations, especially considering, you know, in the opening remarks management, you pointed out the impact on the advertising pricing under the current environment.

Speaker Change: Thank you, Martin and James.

Ali John: We will take the next question from Ali John from Corey. Thank you so much, management for taking my questions. I have to, number one, is really on the advertising segment. So, second quarter, we've been the birth 19 percent growth seems much more resilient versus the prior expectations, especially considering, you know, in the opening remarks management, you pointed out the impact on the advertising pricing under the current environment.

Speaker Change: Thank you. We will take the next question from Ali Jung from Macquarie.

Unknown Executive: Number one is really the advertising segment. So in the second quarter, we've delivered 19% growth. It seems much more resilient versus prior expectations, especially considering, you know, in the opening remarks, management, you pointed out the impact on advertising pricing under the current environment. Just wondering what we have done differently, both with video accounts and the other app formats, and how we have observed the advertisers' behavior shift under the current dynamics and how we're planning to defend macro volatility.

Ali Jung: Thank you so much, management, for taking my questions. I'll add two. Number one is really on the advertising segment. So second quarter, we've delivered 19%. Growth seemed much more resilient versus the prior expectations, especially considering, you know, in the opening remarks, management, you pointed out the impact on the advertising pricing under the current environment. Just wondering what we have done differently, both with video accounts and the other app formats, and how we have observed the advertisers' behavior shift under the current environment.

Unknown Executive: Just wondering what we have done differently, both with video accounts and the other app formats, and how we have observed the advertiser's behavior shifts under the current dynamic and how we're planning to defend the macro volatility.

James Mitchell: Just wondering what we have done differently, both with video accounts and the other app formats and how we have observed the advertiser's behavior shifts under the current dynamic and how we're planning to defend the macro volatility. The second one is really on the AI integration progress within our ecosystem. We already heard some exciting upgrades with the advertising segment. Just wondering if anything else you could share, such as the large language model training progress, application explorations, opportunities, and how we plan to strategize to further bump up the efficiency and adoption.

Speaker Change: dynamic and how we're planning to defend the macro volatilities.

Unknown Executive: The second one is really about the AI integration progress within our ecosystem. We've already heard some exciting upgrades with the advertising segment. Just wondering if there's anything else you could share, such as the large-language model training progress, application explorations, opportunities, and how we plan to strategize to further bump up efficiency adoption. Thank you.

Unknown Executive: The second one is really on the AI integration progress within our ecosystem. We already heard some exciting upgrades with the advertising segment. Just wondering if anything else you could share, such as the large language model training progress, application explorations, opportunities, and how we plan to strategize to further bump up the efficiency and adoption. Thank you.

Speaker Change: The second one is really on the AI integration progress within our ecosystem. We already heard some exciting upgrades with the advertising segment. Just wondering if anything else you could share, such as the large language model training progress, application explorations, opportunities, and how we plan to strategize to further bump up the efficiency adoption. Thank you.

Unknown Executive: So, I'll take the advertising question. And, you know, we haven't made dramatic changes. We're just continuing to execute along our path. And, you know, we are benefiting from the deployment of neural network artificial intelligence on a GPU infrastructure to boost the click-through rate on our advertising inventory. You know, we are benefiting from a mixed shift of advertising within where machine increasingly being of a closed-loop nature. And, all in our sequel, as you can see from the big e-commerce marketplaces and short video services, closed-loop advertising tends to achieve higher, both higher CPM but also higher click-through rate versus non-closed-loop advertising.

James Mitchell: Thank you. So, I'll take the advertising question. And, you know, we haven't made dramatic changes. We're just continuing to execute along our path. And, you know, we are benefiting from deployment of neural network artificial intelligence on a GPU infrastructure to boost the click-through rate on our advertising inventory. You know, we are benefiting from a mixed shift of advertising within where machine increasingly being of a closed-loop nature. And, all in our sequel, as you can see from the big e-commerce marketplaces and short video services, closed-loop advertising tends to achieve higher, both higher CPM but also higher click-through rate versus non-closed-loop advertising. And then, you know, we have the potential to benefit from releasing more inventory, especially in video accounts. But in reality, in the first half of the year, we didn't release incremental inventory.

Unknown Executive: So I'll take the advertising question. And We haven't made any dramatic changes. We're just continuing to execute along our path, and we are benefiting from the deployment of neural network artificial intelligence on a GPU infrastructure to boost the click-through rate on our advertising inventory. We are benefiting from a mixed shift of advertising within Weixin, increasingly being of a closed-loop nature. And all else equal, as you can see from the big e-commerce marketplaces and short video services, closed-loop advertising tends to achieve both higher CPM but also higher click-through rates versus non-closed-loop advertising.

Speaker Change: I'll take the advertising question and you know we haven't made dramatic changes we're just continuing to execute along our path.

Speaker Change: And we are benefiting from deployment of neural network artificial intelligence on a GPU infrastructure to boost.

Speaker Change: the click-through rate on our advertising inventory. We are benefiting from a mixed shift.

Speaker Change: of advertising within Weishen, increasingly being of a closed-loop nature.

Speaker Change: And all else equal, as you can see from the big e-commerce marketplaces and short video services, closed-loop advertising tends to achieve higher...

Speaker Change: both higher CPM but also higher click-through rate.

Unknown Executive: And then we have the potential to benefit from releasing more inventory, especially in video accounts. But in reality, in the first half of the year, we didn't release any incremental inventory. So the growth that we experienced was more a function of the first two features. Well, in terms of AI, I would say, you know, we look at AI as a more complete suite than just a large language models. They are neural networks, machine learning-based recommendation engines, which we use for content recommendation, video recommendation, as well as talking in the ads and content use case, which is already delivering very good results. If you take video accounts as an example, by using AI, we are actually able to deliver better content, and that generates more user time.

Unknown Executive: And then, you know, we have the potential to benefit from releasing more inventory, especially in video accounts. But in reality, in the first half of the year, we didn't release incremental inventory. So, the growth that we experienced with more function of the first two features.

Speaker Change: versus non-closed-loop advertising. And then, you know, we have the potential to benefit from releasing more inventory, especially in video accounts.

Speaker Change: But in reality, in the first half of the year, we didn't release incremented inventory. So the growth that we experienced was more a function of the first two features.

James Mitchell: So, the growth that we experienced with more function of the first two features. Well, in terms of AI, I would say, you know, we look at AI as, you know, more complete suite than just large language model, you know, they are, they're neural networks, machine learning based recommendation engines, which we use for content recommendation, video recommendation, as well as talking in the ads and content use case, which is, you know, already delivering very good results.

Unknown Executive: Well, in terms of AI, I would say, you know, we look at AI as, you know, a more complete suite than just large language models. You know, they are, they're neural networks, machine learning-based recommendation engines, which we use for content recommendation, video recommendation, as well as talking in the ads and content use case, which is, you know, already delivering very good results. If you take video accounts in the example, by using AI we actually are able to deliver better content, and that generates more use time. You know, a pretty big part of the growth in terms of the video accounts user time is actually driven by better targeting, better recommendation, and you know, that's intern driven by AI.

Speaker Change: Well, in terms of AI, I would say, you know, we look at AI as...

Speaker Change: you know more complete suite than just

Speaker Change: large-language model. You know, there are...

Speaker Change: Neural Networks, machine learning based recommendation engines which we use for content recommendation, video recommendation, as well as at talking in the ads.

Speaker Change: and content...

Speaker Change: use case, which is already delivering very good results. If you take a video account as an example,

James Mitchell: If you take video accounts in the example, by using AI we actually are able to deliver better content, and that generates more use time, you know, a pretty big part of the growth in terms of the video accounts user time is actually driven by better targeting, better recommendation, and you know, that's intern driven by AI. And at the same time on the ads recommendation and, you know, if we can actually increase conversion by 10%, right, you know, that's sort of, you know, pretty modest improvement than, you know, the revenue actually grows, you know, quite a bit, right.

Speaker Change: By using AI we actually are able to deliver better content and that generates more use time and you know a pretty big part of the growth in terms of the video accounts.

Unknown Executive: And a pretty big part of the growth in terms of video accounts and user time is actually driven by better targeting, better recommendations, and that's in turn driven by AI. And at the same time, on the ad recommendation end, if we can actually increase conversion by 10%, that's a pretty modest improvement, then the revenue actually grows quite a bit. So I think that's an area in which we're leveraging AI to deliver material and tangible commercial results.

Speaker Change: years at a time is actually driven by better targeting, better recommendation, and you know, that's in turn driven by AI.

Unknown Executive: And at the same time on the ads recommendation and, you know, if we can actually increase conversion by 10%, right, you know, that's sort of, you know, a pretty modest improvement than, you know, the revenue actually grows, you know, quite a bit, right.

Speaker Change: and at the same time on the ads.

Speaker Change: Recombation and, you know, if we can actually increase conversion by...

Speaker Change: 10% right you know that that's sort of you know pretty modest

Speaker Change: improvement, then, you know, the revenue actually grows, you know, quite a bit, right? So I think, you know, that's

Unknown Executive: So I think, you know, that's areas in which we are leveraging AI to deliver material and tangible commercial results.

James Mitchell: So I think, you know, that's areas in which we are leveraging AI to deliver material and tangible commercial results. In addition, in the area of games, we are actually, you know, using AI to reach the gap between PV and PVP, right, you know, so when you have games which allow people to play against other players, but at the same time, sometimes you actually want to create a game mode in which a player actually played against the machine, right.

Speaker Change: areas in which we are leveraging AI to deliver material and tangible commercial results.

Unknown Executive: In addition, in the area of games, we're actually using AI to bridge the gap between PVE and PVP. So when you have games that allow people to play against other players, but at the same time, sometimes you actually want to create a game mode in which a player actually plays against the machine, then in the past, the machine was actually quite dumb.

Unknown Executive: In addition, in the area of games, we are actually, you know, using AI to reach the gap between PV and PVP, right, you know, so when you have games which allow people to play against other players, but at the same time, sometimes you actually want to create a game mode in which a player actually played against the machine, right. You know, then in the past, the machine is actually quite dope, right. And with AI, we can actually make the machine play like a real player, and we can actually sort of have it to play at varying levels of skills and make the user experience and the game play very fun.

Speaker Change: In addition, in the area of games, we're actually using AI to bridge the gap between PvE and PvP, right? So when you have...

Speaker Change: Games, which allow people to play against other players, but at the same time, sometimes you actually want to create a game mode in which a player actually play against

Unknown Executive: And with AI, you can actually make the machine play like Real Player, and we can actually have it play at varying levels of skill and make the user experience and the gameplay very fun. So I think those are the areas which are not LLM but are generating very tangible results for our businesses. Now, in terms of LLM, the key thing for us is actually improving the technology. And, you know, as we shared before, we have already built an MOE architecture model which is performing as one of the top models in China. And, and, you know, when compared with international models in the Chinese language, I think we're at the top of the pack.

James Mitchell: You know, then in the past, the machine is actually quite dope, right. And with AI, we can actually make the machine play like a real player, and we can actually sort of have it to play at varying levels of skills and make the user experience and the game play very fun. So I think, you know, those are the areas which are not LLM but, you know, generating very tangible results for our business business.

Speaker Change: the machine, right, you know, then, in the past, machine is actually quite dumb, right. And with AI, we can actually make the machine play like

Speaker Change: real player and we can actually set a new habit to play at varying levels of skills and make the user experience and the gameplay very fun.

Unknown Executive: So I think, you know, those are the areas which are not LLM but, you know, generating very tangible results for our business business.

Speaker Change: So I think those are the areas which are not LLM, but generating very tangible results for our businesses.

Unknown Executive: Now, in terms of LLM, the key thing for us is actually improving the technology, and you know, as we shared before, we have already built an MOE architecture model which is performing as one of the top models in China, and you know, when compared with international models on Chinese language, I think, you know, we have the top of the pack. And we are deploying our LLM in Yangbao, right, which is an app that we have launched which allowed users to interact with our LLM model in multiple ways. And one way is enhanced search functionality so that users can actually, you know, ask a question, and based on search results, we can actually provide very direct answer to the questions that our users pose.

James Mitchell: Now, in terms of LLM, the key thing for us is actually improving the technology, and you know, as we shared before, we have already built an MOE architecture model which is performing as one of the top models in China, and you know, when compared with international models on Chinese language, I think, you know, we have the top of the pack. And we are deploying our LLM in Yangbao, right, which is an app that we have launched which allowed users to interact with our LLM model in multiple ways.

Speaker Change: Now, in terms of LLM, the...

Speaker Change: key thing for us is actually improving the technology and, you know, as we shared before, we have already built an MOE architecture model, which is performing as one of the top

Unknown Executive: And we are deploying our LLM in Yuanbao, right, which is an app that we have launched, which allows users to interact with our large language model in multiple ways. And one way is enhanced search functionality so that users can actually ask a question. And based on search results, we can actually provide very direct answers to the questions that our users pose. And so we have rolled it out to a large enough sample size to get user feedback.

Speaker Change: models in China, and when compared with international models on Chinese language, I think we're at the top of the pack.

James Mitchell: And one way is enhanced search functionality so that users can actually, you know, ask a question and based on search results, we can actually provide very direct answer to the questions that our users pose. And we have loaded out to LLM enough sample size to get user feedback, and the feedback so far has been quite positive. But of course, at the same time, we're also receiving a lot of constructive feedbacks and using that to keep improving our product as well as our model, and over time, Yuan Bao, when it gets to a certain level of quality, then we're going to increase our promotional resources and try to get more users into the app.

Speaker Change: And we are deploying our LLM in Yuanbao, which is an app that we have launched, which allowed users to interact with our...

Speaker Change: a large language model in multiple ways, and one...

Speaker Change: a way is enhanced search functionality so that

Speaker Change: Users can actually ask a question and based on search results, we can actually provide

Speaker Change: very direct answer to

Unknown Executive: And we have loaded out to LLM enough sample size to get user feedback, and the feedback so far has been quite positive. But of course, at the same time, we're also receiving a lot of constructive feedback and using that to keep improving our product as well as our model. and over time, Yuan Bao, when it gets to a certain level of quality, then we're going to increase our promotional resources and try to get more users into the app. And at the same time, when it gets to an even better level of expertise, then we can actually start incorporating it into different parts of our ecosystem.

Speaker Change: the questions that our users pose. And so we have rolled it out to a large enough.

Unknown Executive: And the feedback so far has been quite positive. But, of course, at the same time, we're also receiving a lot of constructive feedback. And then we're using that to keep improving our product as well as our model. And, you know, over time, Yuanbao, when it gets to a certain level of quality, then we're going to increase our promotional resources and try to get more users into the app. And at the same time, when it gets to an even higher level of expertise, then we can actually start incorporating it into different parts of our ecosystem.

Speaker Change: Sample size to get user feedback, and the feedback so far has been quite positive. But of course, at the same time, we're also receiving a lot of constructive feedback, and we're using that to keep improving our product as well as our model.

Speaker Change: and...

Yuanbao: Over time, Yuanbao, when it gets to a certain level of quality, then we're going to increase.

Yuanbao: promotional resources and try to get more users into the app.

James Mitchell: And at the same time, when it gets to a even better level of expertise, then we can actually start incorporating it into different parts of our ecosystem. We have a lot of apps which actually has got, you know, interaction use cases which can leverage our Janet AI technology and, you know, we would be incorporating our tool into those use cases at the time when the quality of our product is good. And at the same time as we continue to improve the efficiency of the model so that, you know, these products can be delivered to the users at a cost effective way. Thank you very much.

Yuanbao: And at the same time, when it gets to a even better level of expertise, then we can actually start incorporating it into different parts of our ecosystem. We have a lot of apps which actually has got...

Unknown Executive: We have a lot of apps which actually has got, you know, interaction use cases which can leverage our Janet AI technology and, you know, we would be incorporating our tool into those use cases at the time when the quality of our product is good. And at the same time as we continue to improve the efficiency of the model so that, you know, these products can be delivered to the users at a cost-effective way.

Unknown Executive: We have a lot of apps that actually have got, you know, interaction use cases that we can leverage our genetic AI technology on. And, you know, we would be incorporating our tool into those use cases at the time when the quality of our product is good. And at the same time, we continue to improve the efficiency of the model so that, you know, these products can be delivered to the users in a cost-effective way. Thank you very much. We will take the next question from Alex Yao of J.T. Morgan.

Yuanbao: you know, interaction use cases, which we can leverage our genetic AI technology.

Yuanbao: And, you know, we would be incorporating our tool into those use cases at the time when the quality of our product is good, and at the same time as we continue to improve the efficiency of the model so that, you know, these...

Yuanbao: these products can be delivered to the users at a cost-effective way.

Alex Yao: We will take the next question from Alex Yao from Jason Yao. Thank you, management, for taking my question, and congrats on a strong quarter. My first question is regarding DNF Mobile. The game has achieved a strong initial momentum since the launch in late May. How do you guys think about the sustainability of this game? I'm asking because this is not a typical tactical East Coast game such as Owner Came or Peacekeeper Elites that we have a lot of expertise, domain knowledge, and execution track records. So given the draw of nature of the game, what's the strategy and outlook for the game's sustainability?

Speaker Change: Thank you very much.

Alex Yao: Thank you. We will take the next question from Alex Yao from Jason Yao. Thank you, management for taking my question and congrats on a strong quarter. My first question is regarding DNF mobile. The game has achieved a strong initial momentum since the launch in late May. How do you guys think about the sustainability of this game? I'm asking because this is not a typical tactical East Coast game such as owner came or peacekeeper elites that we have a lot of expertise, domain knowledge and execution track records. So given the draw of nature of the game, what's the strategy and outlook for the game's sustainability?

Speaker Change: Thank you. We will take the next question from Alex Yao from J.C. Morgan.

Unknown Executive: Thank you, management, for taking my question and congratulations on a strong quarter. My first question is regarding DNF Mobile. The game has achieved strong initial momentum since its launch in late May. How do you guys think about the sustainability of this game? I'm asking because this is not a typical tactical esports game, such as Honor King or Peacekeeper Elite, where we have a lot of expertise, domain knowledge, and execution track record.

Alex Yao: Thank you management for taking my question and congrats on a strong quarter. My first question is regarding DNF Mobile. The game has achieved a strong initial momentum since the launch in late May.

Alex Yao: How do you guys think about the sustainability of this game?

Speaker Change: I'm asking because this is not a typical tactical esports game, such as Honor of Kings or Peacekeeper Elite, that we have a lot of expertise, domain knowledge, and execution track records.

Unknown Executive: So given the genre and the nature of the game, what's the strategy and outlook for the game's sustainability? And the second question is regarding fintech. The growth rate of the fintech business was inevitably affected by a slow consumption environment and also high price sensitivity among consumers. Have you observed a consumption behavior change in terms of financial product transactions on the WeChat platform? If so, are these changes structural or cyclical? Thank you. Hi Alex.

Speaker Change: So given the genre, the nature of the game, what's the strategy and outlook for the game's sustainability?

Alex Yao: And the second question is regarding Fintech. The growth rate of the Fintech business was inevitably affected by a slow consumption environment and also high price sensitivity among consumers. Have you observed the consumption behavior change in terms of financial product transaction? We've seen platform. If so, are these changes as structural or cyclical?

Alex Yao: And the second question is regarding Fintech. The growth rate of the Fintech business was inevitably affected by a slow consumption environment and also high price sensitivity among consumers. Have you observed the consumption behavior change in terms of financial product transaction? We've seen platform. If so, are these changes as structural or cyclical? Thank you. Hi, Alex. Thank you. On Dungeon and Fighter mobile, we're very optimistic about the sustainability. The first reason is that there is the Dungeon and Fighter PC game that has sustained at a high level for 16 years.

Speaker Change: And the second question is regarding fintech. The growth rate of the fintech business was inevitably affected by a slow consumption environment and also high price sensitivity among consumers.

Speaker Change: Have you observed a consumption behavior change in terms of financial product transaction on WeChat platform? If so, are these changes structural or cyclical? Thank you.

Alex Yao: Thank you.

Alex Yao: Hi, Alex. Thank you. On Dungeon and Fighter Mobile, we're very optimistic about the sustainability. The first reason is that there is the Dungeon and Fighter PC game that has sustained at a high level for 16 years. And so I think that we believe we do have expertise in operating this kind of game. We've done it for 16 years successfully with Dungeon and Fighter PC, and now we're extending it to a new platform. In a secondly, we can see that in the 60-odd days since launch, Dungeon and Fighter mobile has very good retention rates. 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.

Unknown Executive: Thank you. On Dungeon and Fighter mobile, we're very optimistic about its sustainability. You know, the first reason is that, you know, there is the Dungeon and Fighter PC game that has been at a high level, a very high level for 16 years. And so I think that, you know, we believe we do have expertise in operating this kind of game. We've done it for 16 years successfully with Dungeon and Fighter PC, and now we're extending it to a new platform. You know, secondly, we can see that in the 60-odd days since launch, Dungeon Fighter Mobile has a very good retention rate. And, you know, of course, retention rates can fluctuate over time.

Alex Yao: And so I think that we believe we do have expertise in operating this kind of game. We've done it for 16 years successfully with Dungeon and Fighter PC and now we're extending it to a new platform. In a secondly, we can see that in the 60 odd days since launch, Dungeon and Fighter mobile has very good retention rates. 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.

Hi Alex: Hi Alex, thank you. On Dungeon and Fighter Mobile, we're very optimistic about the sustainability. You know, the first reason is that

Speaker Change: There is the Dungeon and Fighter PC game that has sustained at a high level, a very high level for 16 years.

Speaker Change: And so I think that, you know, we believe we do have expertise in operating this kind of game. We've done it for 16 years successfully with Dungeon Fighter PC, and now we're extending it to a new platform. You know, secondly, we can see that in the...

Speaker Change: Sixty-odd days since launch, Dungeon Fighter Mobile has very good retention rates.

Speaker Change: and...

Unknown Executive: But actually, the first 30 days of a game's life, those, you know, first 30-day retention rates are historically very good leading indicators for which games would enjoy the greatest longevity. And so, you know, whether it's League of Legends or Teamfight Tactics or Peacekeeper Elite or Honor of Kings, what sets them apart in their first 30 days was not how many users downloaded the games, nor was it how much revenue they generated. It was the high retention rates that they were displaying among those users who had installed and begun playing the game. You know, we're also seeing very good retention rates for DNF Mobile.

Speaker Change: You know, of course, retention rates can fluctuate over time, but actually, the first 30 days of a game's life.

Speaker Change: those first 30-day retention rates.

Speaker Change: are historically very good leading indicators.

Alex Yao: And so whether it's League of Legends or Teamfight Tactics or Peacekeeper Elite or Honor of Kings, what marked them out in their first 30 days was not how many users downloaded the games, was not how much revenue they generated. It was the high retention rates that they were displaying among those users who had installed and begun playing the game. We're also seeing very good retention rates for DNF Mobile. And of course, because the DNF mobile game has been in development for an unusually long period, there's a very heavy content pipeline over the next two to three years that's already set up that will be progressively released.

Alex Yao: And so whether it's League of Legends or Teamfight Tactics or Peacekeeper Elite or Honor of Kings, what marked them out in their first 30 days was not how many users downloaded the games, was not how much revenue they generated. It was the high retention rates that they were displaying among those users who had installed and begun playing the game. We're also seeing very good retention rates for DNF mobile. And of course, because the DNF mobile game has been in development for an unusually long period, there's a very heavy content pipeline over the next two to three years that's already set up that will be progressively released.

Speaker Change: for which games would enjoy the greatest longevity. And so, you know, whether it's, you know, League of Legends or

Speaker Change: team fight tactics, or peacekeeper, or leader, or owner of kings.

Speaker Change: What marked them out in their first 30 days was not how many users downloaded the games, was not how much revenue they generated, it was the high retention rates that they were displaying among those users who had installed and begun playing the game.

Speaker Change: and you know we're also seeing very good retention rates for DNF Mobile and of course you know because the DNF Mobile game has been in development

Unknown Executive: And of course, you know, because the DNF Mobile game has been in development for an unusually long period, there's a very heavy content pipeline for the next two to three years that's already set up that will be progressively released. And of course, during those two to three years, you know, Nexon and we will be working on content for subsequent years. But the game is in an unusual situation where, because of its unusually long development pipeline, there's now an unusually long post-release content pipeline that's already ready to release as and when we choose to do so. So that's what DNF Mobile is about.

Alex Yao: And of course, during those two to three years, in the next one, we will be working on the content pipeline for subsequent years. But the game is in an unusual situation where, because if it's unusually long development pipeline, there's now an unusually long post-release content pipeline that's already released as soon as we choose to do so.

Speaker Change: for an unusually long period. There's a very heavy content pipeline over the next two to three years that's already set up.

Alex Yao: And of course, during those two to three years, in the next one, we will be working on the content pipeline for subsequent years. But the game is in an unusual situation where, because of its unusually long development pipeline, there's now an unusually long post-release content pipeline that's already released as soon as we choose to do so. So that's on DNF Mobile.

Speaker Change: that will be progressively released and of course during those two to three years

Speaker Change: You know, Nexon and we will be working on the content pipeline for subsequent years. But the game is in an unusual situation where, because of its unusually long development pipeline, there's now an unusually long post-release content pipeline that's already ready to release as and when we choose to do so.

Unknown Executive: So that's on DNF mobile. So, on FinTech, if we dissect into different businesses, the payment business is definitely very tight to consumption growth, and as you can see in the official data consumption growth in China is actually kind of weak, and we also clearly see that in our payment business. In the sense that we saw a continued growth in terms of the number of transactions, so the number of transactions on the commercial side continued to grow double digit, but on the other hand, the average transaction value has decreased, which is country to before, in which we have seen a pretty consistent growth in terms of average transaction value over a very long period of time.

Alex Yao: So, on FinTech, if we dissect into different businesses, the payment business is definitely very tight to consumption growth, and as you can see in the official data, consumption growth in China is actually kind of weak, and we also clearly see that in our payment business. In the sense that we saw a continued growth in terms of the number of transactions, so the number of transactions on the commercial side continued to grow double digit, but on the other hand, the average transaction value has decreased, which is country to before, in which we have seen a pretty consistent growth in terms of average transaction value over a very long period of time.

Unknown Executive: So on FinTech, if we..., it's affecting different businesses, right? The payment business is definitely very tied to consumption growth. And as you can see in the official data, consumption growth in China is actually kind of weak.

Speaker Change: So that's on TNF Mobile.

Speaker Change: So on Fintech, if we...

Speaker Change: You're dissecting two different businesses, right? The payment business is definitely very tied to consumption.

Speaker Change: growth. And as you can see, in the official data, consumption growth in China is actually kind of weak.

Unknown Executive: And we also clearly see that in our payment business, in the sense that we saw a continued growth in terms of the number of transactions. So the number of transactions on the commercial side continues to grow double digits. But on the other hand, the average transaction value has decreased, which is contrary to before, in which we had seen pretty consistent growth in terms of average transaction value over a very long period of time. So we felt that this is a clear demonstration of the fact that consumers are getting much more budget conscious. And, um...

Speaker Change: and we also clearly see that in our payment business in the sense that we we saw a continued growth in terms of the number of transactions so the number of transactions

Speaker Change: on the commercial side continue to grow double digit. But on the other hand, the average transaction value has decreased.

Speaker Change #100: which is contrary to before, in which we have seen a pretty consistent growth in terms of average transaction value over a very long period of time.

Alex Yao: So, we felt that this is a clear demonstration of the fact that consumers are getting much more budget conscious, and so that's on the payment side. In terms of the credit, we do see consumers actually wanting to borrow more at this point in time, but then the revenue actually decreased because we proactively control the amount that we let out, and we let out because we want to tighten the credit at this point of time when the macro and consumption is kind of weak. And on the other hand, wealth management actually increased because a lot of consumers, instead of spending, they actually save more during uncertain times.

Unknown Executive: So, we felt that this is a clear demonstration of the fact that consumers are getting much more budget conscious, and so that's on the payment side. In terms of the credit, we do see consumers actually wanting to borrow more at this point in time, but then the revenue actually decreased because we proactively control the amount that we let out, and we let out because we want to tighten the credit at this point of time when the macro and consumption is kind of weak.

Speaker Change #100: So, we felt that this is a clear demonstration of the fact that consumers are getting much more budget conscious.

Unknown Executive: So that's on the payment side. In terms of credit, we do see consumers actually wanting to borrow more at this point in time, but then the revenue actually decreased because we proactively control the amount that we lend out, and we then lend out because we want to tighten the credit at this point in time when the macro and consumption are kind of weak. And on the other hand, wealth management actually increased because a lot of consumers, instead of spending, actually saved more during uncertain times.

Speaker Change #100: So that's on the payment side. In terms of the credit.

Speaker Change #101: We do see consumers actually wanting to borrow more at this point in time, but then the revenue actually decreased because we proactively control the amount that we lend out.

Speaker Change #101: And we've been let out because we want to tighten the credit at this point of time when the macro and consumption is kind of weak.

Unknown Executive: And on the other hand, wealth management actually increased because a lot of consumers, instead of spending, they actually save more during uncertain times. So, these are the dynamics that's happening across the different product areas within FinTech. We felt this is more cyclical rather than structural because it's somewhat tied to the weak consumption pattern that's happening in the overall market. And as a result of that, we have seen the government actually rolling out very proactive policies to encourage consumption, and with that, with these road outs of such policies, at some point in time, the consumer's sentiment, as well as the economy, will start turning.

Speaker Change #101: And on the other hand, wealth management actually increased because a lot of consumers, instead of spending, they actually save more during uncertain times.

Unknown Executive: So these are the dynamics that are happening across the different product areas within fintech. We feel this is more cyclical rather than structural because it's somewhat tied to the weak consumption pattern that's happening in the overall market. And as a result of that, we have seen the government actually rolling out very proactive policies to encourage consumption. And we feel that with these rollouts of such policies, at some point in time, consumer sentiment, as well as the economy, will start turning. Because, as evidenced in the wealth management service, it's not as if people don't have money; people actually sort of have money, but they choose to save rather than spend.

Alex Yao: So, these are the dynamics that's happening across the different product areas within FinTech. We felt this is more cyclical rather than structural because it's somewhat tied to the weak consumption pattern that's happening in the overall market. And as a result of that, we have seen the government actually rolling out very proactive policies to encourage consumption, and with that, with these road outs of such policies, at some point in time, the consumer's sentiment, as well as the economy, will start turning. Because, as evidenced in the wealth management service, it's not as if people don't have money; people actually sort of have money, but they choose to save, rather than to spend.

Speaker Change #101: So these are the dynamics that's happening across the different product areas within FinTech.

Speaker Change #101: We felt this is more cyclical rather than structural because it's somewhat tied to the

Speaker Change #101: wheat consumption pattern that's happening in the overall market.

Unknown Executive: Because as evidenced in the wealth management service, it's not as if people don't have money, people actually sort of have money, but they choose to save, rather to spend. And if the government policies can actually induce more confidence among the consumers and start revitalizing different parts of the economy that we felt, at some point in time, consumer sentiment would turn and that would be good for our FinTech business. Thank you.

Speaker Change #101: And as a result of that, we have seen the government actually rolling out very proactive policies to encourage consumption.

Speaker Change #101: And we felt with these rollouts of such policies, at some point in time,

Speaker Change #101: the consumer sentiment, as well as the economy will start turning. You know, because as evidenced in the wealth management service, it's not as if like people don't have money. People actually sort of have money, but they choose to save rather to spend.

Unknown Executive: And if government policies can actually induce more confidence among consumers and start revitalizing different parts of the economy, we feel at some point in time, consumer sentiment would turn, and that would be good for our fintech business. Thank you. Next, we will take the question from Charlene Liu from HSBC. Thank you very much.

Alex Yao: And if the government policies can actually induce more confidence among the consumers and start revitalizing different parts of the economy that we felt, at some point in time, consumer sentiment would turn, and that would be good for our FinTech business.

Speaker Change #101: And if the government policies can actually induce more confidence among the consumers and start revitalizing different parts of the economy, then we felt at some point in time consumer sentiment would turn and that would be good for our FinTech business.

Unknown Executive: Thank you.

Unknown Executive: Next, we will take the questions from Sean and Neil from HSTC. Thank you very much. Martin mentioned that the bar for game quality and expectations have only gone up and turned more demanding.

Unknown Executive: Next, we will take the questions from Sean and Neil from HSTC. Thank you very much. Martin mentioned that the bar for game quality and expectations have only gone up and turned more demanding.

Speaker Change #102: Thank you. Next we will take the question from Charlene Liu from HSBC.

Unknown Executive: Martin mentioned that the bar for game quality and expectations has only gone up and turned more demanding. Can management discuss where we are in the investment cycle for AAA titles? And can you please give us an update on the latest progress and whatnot?

Speaker Change #103: Thank you very much. Martin mentioned that the bar for game quality and expectations have only gone up and turned more demanding. Can management discuss where we are in the investment cycle for AAA titles and can you please give us an update on latest progress and whatnot?

Unknown Executive: Can management discuss where we are in the investment cycle for AAA titles? And can you please give us an update on the latest progress and whatnot? That's the first question. And separately, we have seen that cross-pollination of literature or existing PC games IPC has played quite a vital role for driving growth in long videos, as well as for mobile games. Honor of King World is obviously a highly anticipated title. What is the progress there?

Unknown Executive: Can management discuss where we are in the investment cycle for AAA titles? And can you please give us an update on latest progress and whatnot? That's the first question. And separately, we have seen that cross-pollination of literature or existing PC games IPC has played quite a vital role for driving growth in long videos, as well as for mobile games. Honor of King World is obviously a highly anticipated title. What is the progress there? And can management also discuss what other IPs in the reserve, which you expect to see similar potential in capable of driving more revenue potential cross-digital content segments?

Unknown Executive: That's the first question. And separately, we have seen that cross-pollination of literature or existing PC game IP has played quite a vital role for driving growth in long videos, as well as for mobile games. Honor of King World is obviously a highly anticipated title.

Speaker Change #104: That's the first question. Separately, we have seen that cross-pollination of literature or existing PC games IP has played quite a vital role for driving growth in long videos as well as for mobile games.

Unknown Executive: What is the progress there? And can management also discuss what other IPs in the reserve would you expect to see similar potential and be capable of driving more revenue potential across digital content segments? Thank you.

Speaker Change #105: Honour of King World is obviously a highly anticipated title. What is the progress there and can management also discuss what other IPs in the reserve would you expect to see similar potential in capable of driving more revenue potential across digital content segments? Thank you.

Unknown Executive: And can management also discuss what other IPs in the reserve, which you expect to see similar potential in capable of driving more revenue potential cross-digital content segments? Thank you. I think the second question, we've talked about some of the other IP based games that we're excited about earlier in this call and also at length at the fourth quarter results call, so I would never refer back to that, but you can also look at what games we have that have become dramatically successful on PCs, such as Valorant, which is now the biggest PC game in China, and of course we'd like to bring that to mobile and that recently secured, it's about how we're publishing license in China, and you can look if you're so inclined at some of the interesting IP being generated by China literature and being generated by Tencent comics and speculators, whether that IP would make sense as the basis for games as well.

Unknown Executive: I think, you know, the second question. We talked about some of the other IP-based games that we're excited about earlier in this call and also at length during the fourth quarter results call. So I would refer back to that. But you can also, you know, look at what games we have that have become dramatically successful on PC, such as, you know, Valorant, which is now the biggest PC game in China.

James Mitchell: Thank you. I think the second question, we've talked about some of the other IP based games that we're excited about earlier in this call and also at length at the fourth quarter results call, so I would never refer back to that, but you can also look at what games we have that have become dramatically successful on PCs, such as Valorant, which is now the biggest PC game in China, and of course we'd like to bring that to mobile and that recently secured, it's about how we're publishing license in China, and you can look if you're so inclined at some of the interesting IP being generated by China literature and being generated by Tencent comics and speculators, whether that IP would make sense as the basis for games as well.

Speaker Change #106: I think, you know, the second question, you know, we've talked about some of the other IP-based games that we're excited about earlier in this call and also at length at the fourth quarter results call, so I would refer back to that, but you can also, you know, look at.

Speaker Change #106: What games we have that have become dramatically successful on PC, such as, you know, Valorant.

Unknown Executive: And, you know, of course, we'd like to bring that to mobile, and it recently secured its Van Howell publishing license in China. And you can look, if you're so inclined, at some of the interesting IP being generated by Chinese literature and being generated by Tencent Comics and speculators, whether that IP would make sense as the basis for games as well. So that's the second question.

Speaker Change #106: which is now the biggest PC game in China.

Speaker Change #106: And, you know, of course, we'd like to bring that to mobile and that recently secured its Van Howell publishing license in China. And you can look, if you're so inclined, at, you know, some of the interesting...

Speaker Change #107: IP being generated by China Literature and being generated by Tencent Comics and speculators, whether that IP would make sense as the basis for games as well. So that's on the second question. In terms of the...

Unknown Executive: In terms of the first question, I'm not sure that there's a cycle per se in AAA game development. You know, I think there's more of a relentless trend where, you know, the game industry is only becoming bigger, and therefore, the budgets associated with the best games are also only becoming bigger. And, you know, we need to compete in that arena.

Unknown Executive: So that's on the second question. In terms of the first question, I'm not sure that there's a cycle per se in AAA game development; I think there's more of a relentless trend where the game industry is only becoming bigger and therefore the budgets associated with the best games are also only becoming bigger, and we need to play in that arena, and that's what we're doing. We have been continually creating a large number of games, as you know. We expense those costs through our P&L; we don't capitalize them, and so what you see is sort of what you get in terms of the income statement tracking the cash flow quite closely. We are indeed investing in a large number of what we believe will be very high-quality games. You know, as to defining which ones in AAA versus which ones are more systems-based, then I think the boundaries are becoming increasingly blurred. If you look at our game Delta Force that's now available for alpha testing on Steam, and it is quite popular. One of the reasons for popularity is that within Delta Force there's a mode that is in a very cinematic classic AAA experience that's modeled on the Black Hawk Down incident, and then there's two other modes which are much more system-based: an extraction shooter mode and 30 versus 30 mode that are much more akin to some of our competitive PVP games. And so Delta Force is an example of something that incorporates both the cinematic AAA experience as well as the competitive PVP experience.

James Mitchell: So that's on the second question, in terms of the first question, I'm not sure that there's a cycle per say in AAA game development, I think there's more of a relentless trend where the game industry is only becoming bigger and therefore the budgets associated with the best games are also only becoming bigger, and we need to play in that arena, and that's what we're doing, and so we have been continually creating a large number of games, as you know, we expense those costs through our P&L, we don't capitalize them, and so what you see is sort of what you get in terms of the income statement tracking the cash flow quite closely, and we are indeed investing in a large number of what we believe will be very high quality games, you know, as to defining which ones in AAA versus which ones are more systems based, then I think the boundaries are becoming increasingly blurred, if you look at our game Delta Force that's now available for alpha testing on Steam, and it is quite popular, one of the reasons for popularity is that within Delta Force there's a mode that is in a very cinematic classic AAA experience that's modeled on the black hook down incident, and then there's two other modes which are much more system based, an extraction shooter mode, and 30 versus 30 mode that are much more akin to some of our competitive PVP games, and so Delta Force is an example of something that incorporates both the cinematic AAA experience as well as the competitive PVP experience. If I can add right now, I think AAA is more like me with not an ads, right, so you can have a play mode driven game, you can have sort of your content driven game, and AAA sort of, you know, is probably more geared to what content driven, but I think, you know, for us, you know, we really want to, the end is actually building game titles to become evergreen titles, and over time, building big enough evergreen titles into platforms, and within the platform, you would have You have play mode driven content.

Speaker Change #108: First question, I'm not sure that there's a...

Speaker Change #109: Cycle per se in AAA game development, you know, I think that's more of a

Speaker Change #109: Relentless trend where the game industry is only becoming bigger

Speaker Change #109: and therefore, you know, the budgets associated with with the best games are also only becoming bigger and you know, we need to

Unknown Executive: And, you know, that's what we're doing. And so we have, you know, been continually creating a large number of games. As you know, we expense those costs through our P&L. We don't capitalize them.

Speaker Change #109: in a play in that arena and you know, that's what we're doing and so we have

Speaker Change #109: You know, being continually creating a large number of gains, as you know, you know, we expense those costs through our P&L, we don't capitalize them. And so what you see is sort of what you get.

Unknown Executive: And so what you see is sort of what you get in terms of the income statement, tracking the cash flow quite closely. And, you know, we are indeed investing in a large number of what we believe will be very high-quality games. As to defining which ones are AAA versus which ones are more systems-based, then, you know, I think the boundaries are becoming increasingly blurred.

Speaker Change #109: in terms of the income statement tracking the cash flow quite closely.

Speaker Change #109: And, you know, we are indeed...

Speaker Change #109: investing in a large number of, you know, what we believe will be very high quality games. You know, as to defining which ones, you know, AAA versus which ones are more systems-based.

Speaker Change #109: Then I think the boundaries are becoming increasingly blurred if you look at our game Delta Force That's now available for alpha testing on Steam and it is quite popular

Unknown Executive: If you look at our game Delta Force, that's now available for alpha testing on Steam, and it is quite popular, one of the reasons for the popularity is that within Delta Force, there's a mode that is, you know, a very cinematic, you know, classic AAA experience that's, you know, modelled on the Black Hawk Down incident.

Unknown Executive: And then there are two other modes, which are much more system-based, you know, an extraction shooter mode and 30 versus 30, that are much more akin to, you know, some of our sort of competitive PvP games. And so, Delta Force is an example of something that incorporates both the cinematic AAA experience as well as the competitive PvP experience. If I can add right now, I think AAA is more like a means, not an end, right?

Speaker Change #109: You know, one of the reasons for the popularity is that within Delta Force, there's...

Speaker Change #109: a mode that is, you know, very cinematic, you know, classic AAA experience that's, you know, modeled on the Black Hawk Down incident.

Speaker Change #109: And then there's two other modes, which are much more system based, you know, an extraction shooter mode, and 30 versus 30 mode, that are much more akin to, you know, some of our sort of competitive PvP games. And so, Delta Force is an example of something that incorporates both

Speaker Change #109: the cinematic AAA experience as well as the competitive PVP experience.

Unknown Executive: If I can add right now, I think AAA is more like me with not an ads, right, so you can have a play mode driven game, you can have sort of your content driven game, and AAA sort of, you know, is probably more geared to what content driven, but I think, you know, for us, you know, we really want to, the end is actually building game titles to become evergreen titles, and over time, building big enough evergreen titles into platforms, and within the platform, you would have You have play mode driven content. You also have content driven play mode.

Speaker Change #110: If I can add right now, I think AAA is more like a meme, it's not an ad, right? So, so you can, you can have...

Unknown Executive: So, you can have a play mode driven game, you can have sort of new content driven games, and AAA sort of, you know, it's probably more geared toward content driven. But I think, you know, for us, we really want to, the end is actually building game titles to become evergreen titles and, over time, building a big enough audience for evergreen titles into platforms. And within the platform, you would have You know, you have play modes driven by content, but you also have content-driven play modes.

Speaker Change #111: a play-mode-driven game, you can have sort of a content-driven game, and AAA is probably more geared toward content-driven.

Speaker Change #112: But I think, you know, for us, you know, we really want to, the end is actually building game titles to become evergreen titles and over time building, you know, big enough evergreen titles into platforms. And within the platform, you would have

Speaker Change #112: You know, you have play-mode driven.

James Mitchell: You also have content driven play mode. So it will be interlaced within a game over one game world. So that's what we felt will be happening. And we see a big opportunity in the future. Of course, it would take some time to develop to put more content driven playing experience into our competitive games. And we felt that it could be a pretty good opportunity for us to get our users within our competitive games to be exciting. And over time, with the event of AI, as I said earlier, when we can actually blur the line between PVP and PVE, then there's actually more opportunity for us along that.

Speaker Change #112: content, you also have content-driven

Unknown Executive: So, you know, it will be, you know, interlaced within a game, the overall game world, you know, so that's sort of, you know, what we felt would be happening. And we see a big opportunity in the future, of course, it would take some time to develop, to put more content-driven playing experiences into our competitive games. And we felt that it could be, you know, a pretty good opportunity for us to get our users within our competitive games to be exciting.

Unknown Executive: So it will be interlaced within a game over one game world. So that's what we felt will be happening. And we see a big opportunity in the future. Of course, it would take some time to develop to put more content-driven playing experience into our competitive games. And we felt that it could be a pretty good opportunity for us to get our users within our competitive games to be exciting. And over time, with the event of AI, as I said earlier, when we can actually blur the line between PVP and PVE, then there's actually more opportunity for us along that.

Unknown Executive: Thank you.

Speaker Change #112: and play mode. So, you know, it will be, you know, interlaced, within a game over-line game world. You know, so that's sort of, you know, what we felt.

Speaker Change #112: will be happening. And we see a big opportunity in the future, of course, it would take some time to develop, to put more content-driven...

Speaker Change #112: playing experience into our competitive games.

Speaker Change #112: and...

Speaker Change #112: We felt that it could be a pretty good opportunity for us to get our users within our competitive games to be exciting. And over time, with the advent of AI, as I said earlier, when we can actually blur

Unknown Executive: And over time, right, you know, with the, you know, advent of AI, as I said earlier, when we can actually blur the line between PVP and PVE, then, you know, there's actually more opportunity for us along that. Thank you. We will take the next question from William Packer from BM2Paper. Hi, management.

Speaker Change #112: The line between PVP and PVE, then there's actually more opportunity for us along that.

Speaker Change #112: [inaudible]

Unknown Executive: We will take the next question from William Packer from BNTP. Hi, Management. Thanks for taking my question. There's been some press speculation around tensions with App Store owners in China regarding several factors, for example, fees and external payment systems, which is parallel to what we're seeing in Europe and elsewhere. Could you help us think through the challenges and opportunities across the portfolio? For example, do you still see upside for the gaming business growth margin from reducing payments, or in contrast, should be more cautious to the elements of the market? That's quite a dense question.

William Packer: We will take the next question from William Packer from BNTP. Hi, management. Thanks for taking my question.

Speaker Change #112: Thank you, William.

Speaker Change #112: Thank you. We will take the next question from William Packer from BN2 Powerpoint.

Unknown Executive: Thanks for taking my question. There's been some press speculation around tensions with app store owners in China regarding several factors, for example, fees and external payment systems. Business Parallels, what we're seeing in Europe and elsewhere. Could you help us think through the challenges and opportunities across the portfolio? For example, do you still see upside for the gaming business' gross margin from reducing payments? Or, on the contrary, should we be more cautious about elements of the WeChat ecosystem? Any color would be appreciated.

Unknown Executive: There's been some press speculation around tensions with App Store owners in China regarding several factors, for example, fees and external payment systems, which is parallel to what we're seeing in Europe and elsewhere. Could you help us think through the challenges and opportunities across the portfolio? For example, do you still see upside for the gaming business growth margin from reducing payments or in contrast should be more cautious to the elements of the market? That's quite a dense question.

Widen Packer: Hi, management. Thanks for taking my question. There's been some press speculation around tensions with app store owners in China regarding several factors, for example, fees and external payment systems.

Speaker Change #114: This is Parallels, what we're seeing in Europe and elsewhere.

Speaker Change #115: Could you help us think through the challenges and opportunities across the portfolio? For example, do you still see upside for the gaming business gross margin from reducing payments? Or in contrast, should we be more cautious for elements of the WeChat ecosystem? Any colour appreciated. Thank you.

Unknown Executive: Thank you. So that's quite a dense question. And you know, my answer may or may not sort of reflect all of the density. But let me attempt to answer.

Unknown Executive: My answer may or may not reflect all of the density, but let me attempt to answer. There are, indeed, naturally tensions between the gaming industry or the digital content industry versus App Store, and the root cause of the tensions is that the App Store's charge, what the gaming industry feels is a very onerous burden of 30% on games and other forms of digital content. Of course, the App Store's would argue that they provide a beneficial ecosystem that is supportive of this digital content, but then the gaming industry would reply that that ecosystem, if it benefits digital content, also benefits all sorts of other goods and services.

Speaker Change #116: So that's quite a dense question and you know my answer may or may not sort of reflect all of the density but let me attempt to answer so

Unknown Executive: My answer may or may not reflect all of the density, but let me attempt to answer. There are, indeed, naturally tensions between the gaming industry or the digital content industry versus App Store, and the root cause of the tensions is that the App Store's charge, what the gaming industry feels is a very onerous burden of 30% on games and other forms of digital content. Of course, the App Store's would argue that they provide a beneficial ecosystem that is supportive of this digital content, but then the gaming industry would reply that that ecosystem, if it benefits digital content, also benefits all sorts of other goods and services.

Speaker Change #117: There are indeed, you know, naturally tensions between the

Unknown Executive: So, you know, there are indeed, you know, naturally, tensions between the game industry and the digital content industry versus app stores. And, you know, the root cause of the tensions is that, you know, the app stores charge what the game industry feels is a very onerous burden of 30% on games and other forms of digital content. Of course, app stores would argue that they provide a beneficial ecosystem that is supportive of this digital content.

Speaker Change #117: Ad.

Speaker Change #117: Game industry or the digital content industry versus

Speaker Change #117: app stores and you know the root cause of the tensions is that

Speaker Change #117: The app stores charge what the game industry feels is a very onerous burden of 30%.

Speaker Change #117: on games and other forms of digital content.

Unknown Executive: But then the game industry would reply that, you know, that ecosystem, if it benefits digital content, also benefits all sorts of other goods and services. And so why is it the case that, you know, the burden of funding the ecosystem falls disproportionately entirely on the digital content providers and, you know, not at all on all of the other goods and services providers who we could... So, yeah, I think that's, you know, the general backdrop, and, you know, over time, both for regulatory reasons and, you know, business reasons, there is a trend towards the app store take rate, you know, reducing over time.

Speaker Change #117: Of course, the app stores would argue that they provide a beneficial ecosystem that is supportive of this digital content, but then the game industry would reply that that ecosystem, if it benefits digital content, also benefits all sorts of other goods and services. And so why is it the case that...

Unknown Executive: Why is it the case that the burden of funding the ecosystem falls disproportionately entirely onto the digital content providers, not at all onto all of the other goods and services providers who we could I think that's the general backdrop. Over time, both for regulatory reasons and business reasons, there is a trend towards the App Store take rate reducing over time. In terms of our position, then, as you were aware for the Dungeon and Fighter mobile game, given the strength of the IP, given the fact we knew that the most enthusiastic players will seek out the game and download it from the URL, whether it's in an Android App Store or not.

Unknown Executive: Why is it the case that the burden of funding the ecosystem falls disproportionately entirely onto the digital content providers, not at all, on to all of the other goods and services providers who we could I think that's the general backdrop. Over time, both for regulatory reasons and business reasons, there is a trend towards the App Store take rate reducing over time. In terms of our position, then as you were aware for the Dungeon and Fighter mobile game, given the strength of the IP, given the fact we knew that the most enthusiastic players will seek out the game and download it from the URL, whether it's in an Android App Store or not.

Speaker Change #118: The burden of funding the ecosystem falls disproportionately entirely onto the digital content providers and not at all onto all of the other goods and services providers.

Speaker Change #119: He would assist them.

Speaker Change #120: So yeah, I think that's, you know, the general backdrop and, you know, over time, you know, both for regulatory reasons and, you know, business reasons, you know, there is a trend towards the the app store take rate.

Unknown Executive: In terms of, you know, our position, then, as you're aware, for the Dungeon and Fighter mobile game, given the strength of the IP, given the fact we knew that the most enthusiastic players would seek out the game and, you know, download it from the URL, whether it's in an Android app store or not, we made the decision for that specific game to work mostly with internal channels rather than with the onerous Android app store channels. And, you know, we're very happy with that decision.

Speaker Change #120: You know, reducing over time.

Speaker Change #120: In terms of, you know, our position...

Speaker Change #120: Ben.

Ben: As you are aware, for the Dungeon and Fighter mobile game, you know, given the strength of the IP, given the fact we knew that

Ben: The most enthusiastic players will seek out the game and download it from the URL, whether it's in an Android app store or not.

Unknown Executive: We made the decision for that specific game to work mostly with internal channels, rather than with the onerous Android app store channels. We're very happy with that decision. It's beneficial for our returns, and it's fine in terms of user experience, but there will be other games we released in the future with different characteristics where we're seeking to build an audience from scratch, where we look forward to continue to cooperate with the App Store operators. That's in terms of you know, new game releases.

Unknown Executive: We made the decision for that specific game to work mostly with internal channels, rather than with the onerous Android App Store channels. We're very happy with that decision. It's beneficial for our returns and it's fine in terms of user experience, but there will be other games we released in the future with different characteristics where we're seeking to build an audience from scratch where we look forward to continue to cooperate with the App Store operators. That's in terms of You know, new game releases.

Ben: We made the decision for that specific game to work mostly with internal channels rather than with the onerous Android app store channels. And we're very happy with that decision. It's beneficial for our returns.

Unknown Executive: It's, you know, beneficial for our returns, and, you know, we think it's fine in terms of user experience. But, you know, there will be other games being released in the future with different characteristics where we're seeking to build an audience from scratch, and we look forward to continuing to cooperate with, you know, the app store operators. So, you know, that's in terms of new game releases. Your question, I think, also was touching on some of the press commentary around, you know, mini games on iOS.

Ben: and I think it's fine in terms of user experience, but there will be other games we released in the future with different characteristics where we're seeking to build an audience from scratch where we look forward to continue to cooperate with the App Store operators. So, you know, that's in terms of...

Unknown Executive: Your question, I think also was, you know, touching on some of the press commentary around, you know, mini games on iOS and, you know, I think there's been some misunderstandings there about the, you know, nature of the current situation, which is that, you know, today, we don't monetize, you know, mini games on iOS through in-app transactions. And I think it would be in our interests, in Apple's interests, but, you know, more so for the game developers and the users' interests, if that monetization were made available. But, you know, we want to make it available on terms that, you know, we think are economically sustainable and that are also fair.

Unknown Executive: Your question, I think also was, you know, touching on some of the press commentary around, you know, mini games on iOS and, you know, I think there's been some misunderstandings there about the, you know, nature of the current situation, which is that, you know, today, we don't monetize, you know, mini games on iOS through through in app transactions. And I think it would be in our interests, in Apple's interests, but, you know, more so for the game developers and the users' interests, if that monetization were made available, but, you know, we want to make it available on terms that, you know, we think are economically sustainable and that are also fair.

Ben: in new game releases. Your question I think also was...

Unknown Executive: And, you know, I think there's been some misunderstandings there about the nature of the current situation, which is that, you know, today, we don't monetize mini games on iOS through in-app transactions. And I think it would be in our interest, in Apple's interest, but, you know, more so for the game developers and the users' interest if that monetization were made available. But, you know, we want to make it available on terms that, you know, we think are economically sustainable and that are also fair.

Ben: You know, touching on some of the press commentary around.

Ben: In a mini games on iOS and you know, I think there's been some misunderstandings there about the you know nature of the current situation which is that you know today we don't monetize

Ben: I think it would be in our interests, in Apple's interests, but more so for the game developers and the users' interests.

Ben: If that monetization were made available, but, you know, we want to make it available on terms that, you know, we think are economically sustainable and that are also

Unknown Executive: And so, you know, that's a discussion that's underway. And we hope that the discussion needs to be a positive outcome because, you know, it would be a win-win-win. But in the event that, you know, it's just going to be a positive outcome because it would be a win-win-win. But in the event that, you know, it's just going to be a win-win-win. But in the event that the discussion doesn't progress, then the current status quo continues. In the event that the discussion does progress, then, you know, that's, you know, incremental revenue, you know, for us incremental revenue for game developers, potentially incremental revenue for Apple, and certainly a better experience for Apple users.

Unknown Executive: And so, you know, that's a discussion that's underway. And we hope that the discussion needs to be a positive outcome because, you know, it would be a win-win win. But in the event that, you know, it's just going to be a positive outcome because it would be a win-win win. But in the event that, you know, it's just going to be a win-win win. But in the event that the discussion doesn't progress, then the current status quo continues.

Unknown Executive: And so, you know, that's a discussion that's underway, and we hope that the discussion leads to a positive outcome because, you know, it'd be a win-win-win. But in the event that, you know, the discussion doesn't progress, then the current status quo continues. In the event that the discussion does progress, then, you know, that's, you know, incremental revenue for us, incremental revenue for game developers, potentially incremental revenue for Apple, and certainly a better experience for Apple users. Thank you. We will take the next question from Thomas Chong on behalf of Jessica. Hi, good evening.

Unknown Executive: In the event that the discussion does progress, then, you know, that's, you know, incremental revenue, you know, for us incremental revenue for game developers, potentially incremental revenue for Apple, and certainly a better experience for Apple users. Thank you.

Ben: Fair. And so, you know, that's a discussion that's underway, and we hope that the discussion leads to a positive outcome, because it would be a win-win-win. But in the event that, you know, the discussion doesn't progress, then the current status quo continues.

Ben: in the event that the discussion does progress, then, you know, that's, you know, incremental revenue, you know, for us, incremental revenue for game developers, potentially incremental revenue for Apple, and certainly a better experience for Apple users.

Thomas Charles: We will take the next question from Thomas Charles, from Jeffries. Hi, good evening. Thanks very much for taking my question.

Thomas Charles: We will take the next question from Thomas Charles, from Jeffries. Hi, good evening. Thanks very much for taking my question.

Speaker Change #122: Thank you. We will take the next question from Thomas Chong from Jeffries.

Unknown Executive: Thanks, management, for taking my question. My first question is about our cloud business. Given that, I think we need to prepare remarks; we talk about AI-related revenue from high computing infrastructure, the model library service, and also our AI solution for enterprise. I just want to get some more color with regard to our cloud revenue. What are our thoughts about the contribution from AI going forward? And my second question is about capital return. Considering the macro uncertainties these days, any thoughts about upsizing our share repurchase program? Thank you.

Speaker Change #122: i

Speaker Change #122: Hi, good evening. Thanks management for taking my question.

Thomas Charles: My first question is about cloud completeness. Given that, I think we've prepared remarks; we talked about AI-related webinars from high computing infrastructure, model library service, and also our AI solution for enterprise. I just want to get some more color with regard to our cloud revenue. What are our thoughts about the contribution from AI going forward?

Unknown Executive: My first question is about cloud completeness. Given that, I think we've prepared remarks, we talked about AI related webinars from high computing infrastructure, model library service, and also our AI solution for enterprise. I just want to get some more color with regard to our cloud revenue. What are our thoughts about the contribution from AI going forward?

Unknown Executive: And my second question is about capital return.

Huateng Ma: My first question is about...

Huateng Ma: our cloud business. Given that, I think in the prepared remarks, we talk about the AI-related revenue from high computing infrastructure, model library service, and also our AI solution.

Speaker Change #124: for Enterprise. I just want to get some more color with regard to our cloud revenue. What are our thoughts about the contribution from AI going forward? And my second question is about capital return. Considering the macro uncertainties

Thomas Charles: And my second question is about capital return. Considering the macro uncertainties these days, any thoughts about upsizing our shared repurchase program? Thank you.

Unknown Executive: Considering the macro uncertainties these days, any thoughts about upsizing our shared repurchase program? Thank you. So on the first question, you know, clearly for the US hyper scale cloud providers, you know, renting out GPUs to, you know, other companies with AI requirements has, you know, become a very big business. You know, in China, the same trend is evident, but to a lesser extent, you know, to a lesser extent, because you don't have the same, you know, multitude of, you know, extremely well funded startups trying to build large language models on their own in China.

Speaker Change #125: Any thoughts about upsizing our share repurchase program? Thank you.

Thomas Charles: So on the first question, you know, clearly for the US hyperscale cloud providers, you know, renting out GPUs to, you know, other companies with AI requirements has, you know, become a very big business. You know, in China, the same trend is evident, but to a lesser extent, you know, to a lesser extent, because you don't have the same, you know, multitude of, you know, extremely well-funded startups trying to build large language models on their own in China. You know, there are many small companies, but you know, they're capitalized to the billion dollars, two billion dollars; they're not capitalized at 10 billion dollars or 90 billion dollars.

Unknown Executive: So on the first question, clearly, for US hyperscale cloud providers, renting out GPUs to other companies with AI requirements has become a very big business. In China, the same trend is evident, but to a lesser extent. To a lesser extent, because you don't have the same multitude of extremely well-funded startups trying to build large language models on their own in China. There are many small companies, but they're capitalized at a billion dollars, two billion dollars.

Speaker Change #126: So on the first question, you know, clearly for the U.S. hyperscale cloud providers,

Speaker Change #127: Renting out GPUs to other companies with AI requirements has become a very big business.

Speaker Change #128: In China, the same trend is evident, but to a lesser extent, to a lesser extent.

Speaker Change #129: because you don't have the same, you know, multitude of, you know, extremely well-funded.

Speaker Change #129: startups trying to build large-language models on their own in China you know there are many small companies but you know they're capitalized at a billion dollars two billion dollars

Unknown Executive: You know, there are many small companies, but you know, they're capitalized to the billion dollars, two billion dollars, they're not capitalized at 10 billion dollars or 90 billion dollars. That's the way that some of the giant US VC funded startups are now capitalized in the space.

Thomas Charles: That's the way that some of the giant US VC funded startups are now capitalized in the space.

Speaker Change #129: They're now capitalized at $10 billion or $90 billion, the way that some of the giant U.S., B.C.-funded startups are now capitalized in the space.

Unknown Executive: They're not capitalized at 10 billion dollars or 90 billion dollars, either way that some of the giant US BC-funded startups are now capitalized in the space. And it's also a somewhat challenging economic environment. Now that said, we have seen that within our cloud, the demand from customers for renting GPUs for their own AI needs has been growing very swiftly. The percentage growth rates are very fast, but they're very fast partly because it's a low base and also partly because while some of that demand for renting GPUs in the cloud is incremental, some of it is replacing demands that would otherwise have existed anyway for renting CPUs in the cloud.

Thomas Charles: And it's also a somewhat challenging economic environment. Now that said, you know, we have seen that within our cloud, you know, the demand from customers for renting GPUs for their own AI needs has been growing very swiftly. You know, the percentage growth rates are very fast, but you know, they're very fast partly because it's a low base. And also partly because while some of that demand for renting GPUs in the cloud is incremental, some of it is replacing demands that would otherwise have existed anyway for renting CPUs in the cloud. And so, while the business of GPU provision is doing very well, the business of CPU processing is more flat because the incremental demand is for GPU, not CPU.

Unknown Executive: And it's also a somewhat challenging economic environment. Now that said, you know, we have seen that within our cloud, you know, the demand from customers for renting GPUs for their own AI needs has been growing very swiftly. You know, the percentage growth rates are very fast, but you know, they're very fast partly because it's a low base. And also partly because while some of that demand for renting GPUs in the cloud is incremental, some of it is replacing demands that would otherwise have existed anyway for renting CPUs in the cloud. And so while the business of GPU provision is doing very well, the business of CPU processing is more flat because the incremental demand is for GPU not CPU.

Speaker Change #129: and you know and it's you know also a somewhat challenging economic environment.

Speaker Change #130: Now, that said, you know, we have seen that within our cloud, you know, the demand from customers for renting GPUs for their own AI needs has been growing very swiftly.

Speaker Change #130: The percentage growth rates are very fast, but they're very fast partly because it's a low base.

Speaker Change #130: And also partly because while some of that demand for renting GPUs in the cloud is incremental,

Speaker Change #130: Some of it is replacing demands that would otherwise have existed anyway for renting CPUs in the cloud. And so while the business of, you know, GPU provision is doing very well, the business of, you know, CPU processing is more flat because the incremental demand is for, you know, GPU, not CPU.

Unknown Executive: And so while the business of GPU provisioning is doing very well, the business of CPU processing is more flat because the incremental demand is for a GPU, not a CPU. Well, in terms of share buyback, at this point in time, we are continuing with our previously communicated share buyback program, and there's no update for now. Thank you.

Unknown Executive: Go in terms of share buyback, at this point in time, we are continuing with our previously communicative share buyback program, and there's no update for now.

Unknown Executive: Go in terms of share by back, at this point in time, we are continuing with our previously communicative share by back program, and there's no update for now. Thank you.

Speaker Change #131: Well, in terms of share buyback, at this point in time, we are continuing with our previously communicated share buyback program, and there's no update for now.

Gary Yu: Thomas, we will take the last question from Gary Yu, from Robin Stanley. Hi, thank you for the opportunity to ask questions. My first question is regarding domestic games. Again, a poll up on DNF. I think management mentioned that we expect this to be the next evergreen major heads.

Gary Yu: Thomas, we will take the last question from Gary Yu, from Robin Stanley. Hi, thank you for the opportunity to ask questions. My first question is regarding domestic games.

Unknown Executive: We will take the last question from Gary Yu from Morgenstern. Hi, thank you for the opportunity to ask questions. My first question is regarding domestic games. Again, a follow up on DNF. I think management mentioned that we expect this to be the next evergreen major hit. How should we look at the longevity and scale on a sustainable basis versus the other two evergreen games in terms of, you know, amount of DAU or revenue potential in a kind of longer term relative to the kind of owner of Kane and Peacekeeper in late? And my second question is related to macro. I think management indicated that we have started to see some negative impact on payment.

Speaker Change #132: Thank you.

Speaker Change #133: I thank you for the opportunity to ask questions.

Gary Yu: Again, a poll up on DNF. I think management mentioned that we expect this to be the next evergreen major heads. How should we look at the longevity and scale on a sustainable basis versus the other two evergreen games in terms of, you know, the amount of day you are roughly potential in a kind of longer term relative to kind of all of Kane and peacekeeper elite.

Speaker Change #134: My first question is regarding domestic gains, again a follow-up on TNF. I think management mentioned that we expect this to be the next evergreen major hedge.

Gary Yu: How should we look at the longevity and scale on a sustainable basis versus the other two evergreen games in terms of, you know, the amount of day you are roughly potential in a kind of longer term relative to kind of all of Kane and Peacekeeper Elite.

Speaker Change #135: How should we look at the longevity and scale on a sustainable basis versus the other two advertising games in terms of, you know, amount of DAU or revenue potential in a kind of longer term relative to kind of on-off gain and peacekeeper inlay?

Gary Yu: And my second question is related to macro. I think management indicated that we have started to see some negative impact on the payment. How has the recent trend been looking like? So have we seen, you know, a stabilized trend or things like any worse? And also, we noticed that games and the Tencent own ads probably seems to be very resilient under this kind of macro environment. How sustainable do we think we can kind of keep up the current resiliency in the games that are advertising listeners in particular?

Gary Yu: And my second question is related to macro. I think management indicated that we have started to see some negative impact on the payment. How has the recent trend been looking like? So have we seen, you know, stabilized trend or things like any worse? And also, we noticed that games and the Tencent own ads probably seems to be very resilient under this kind of macro environment. How sustainable do we think we can kind of keep up the current resiliency in the games that are advertising listeners in particular?

Speaker Change #136: And my second question is related to macro. I think management indicated that we have started to see some negative impact on payment.

Unknown Executive: How has the recent trend been looking like? So, have we seen, you know, a stabilized trend, or things are getting worse? And also, we noticed that games and Tencent's own ad property seem to be very resilient under this kind of macro environment. How sustainable do we think we can kind of keep up the current resiliency in the games and advertising business, in particular? Thank you.

Speaker Change #137: How has the recent trend been looking like? So have we seen a stabilized trend or things are getting worse?

Speaker Change #138: And also, we noticed that Gaines and the Tencent owned ad property seems to be very resilient under this kind of macro environment.

Speaker Change #138: How sustainable do we think we can kind of keep up the current resiliency in the games and advertising business in particular? Thank you.

Gary Yu: Thank you.

Gary Yu: Hi, Gary. On the Dungeon and Fighter mobile and triangulating it versus historically two biggest games as well as other games that are in the market. Then this is probably stating the obvious. I apologize, but as a narrative rather than systems-based game, one would naturally expect a lower data active user base for DNF mobile. Then one would for more systems-based games, such as Honor of Kings or Peacekeeper Elite. You know, on the other hand, as a narrative, not system based games, one would expect a substantially higher approved for Dungeon Fighter Mobile than for those system based games.

Martin James: Thank you. Hi, Gary. On the dungeon and fighter mobile and triangulating it versus historically two biggest games as well as other games that are in the market. Then this is probably stating the obvious I apologize, but as a narrative rather than systems based game, one would naturally expect a lower data active user base for DNF mobile. Then one would for more systems based games, such as honor of kings or peacekeeper elite.

Unknown Executive: Hi Gary, on Dungeon and Fighter mobile and, you know, triangulating it versus our historically two biggest games, as well as other games that are in the market. Then, you know, this is probably stating the obvious, so I apologize. But you know, as a narrative rather than a systems-based game, one would naturally expect a lower daily active user base for DNF mobile than one would for more systems-based games, such as Honor of Kings or Peacekeeper Elite.

Dungeon: Hi, Gary. On Dungeon and Fighter Mobile and triangulating it versus our

Gary: historically two biggest games as well as other games that are in the market then

Speaker Change #141: You know, this is probably stating the obvious, so I apologize, but, you know, as a...

Speaker Change #142: narrative rather than systems-based game, you know, one would naturally expect, you know, a lower daily active user base for DNF mobile than, you know, one would for more systems-based games such as Honor of Kings or Peacekeeper or Elite.

Unknown Executive: You know, on the other hand, as a narrative, not system based games, one would expect a substantially higher R proof for Dungeon and Fighter mobile than for those system based games. In addition, because Dungeon and Fighter mobile is sort of building on 16 years of legacy, and specifically of, you know, many people who played Dungeon and Fighter PC, you know, 16 years ago, when they were in college, and now, you know, working and they're quite affluent, but only have time to play games on mobile phones, the, you know, spending power of those users is, you know, also greater than it would be for new games that appeal to more of a 20 something user base.

Martin James: You know, on the other hand, as a narrative, not system based games, one would expect a substantially higher approved for dungeon fighter mobile than for those system based games. In addition, because dungeon and fighter mobile is sort of building on the 16 years of legacy and specifically of many people who played dungeon and fighter PC. The 16 years ago when they were in college and now working and they're quite affluent, but only have time to play games on mobile phones.

Speaker Change #142: You know, on the other hand, as a narrative, not system-based games, one would expect.

Speaker Change #142: a substantially higher R-proof for Dungeon Fighter Mobile.

Gary Yu: In addition, because Dungeon and Fighter mobile is sort of building on the 16 years of legacy and specifically of many people who played Dungeon and Fighter PC. The 16 years ago when they were in college and now working, and they're quite affluent, but only have time to play games on mobile phones. The spending power of those users is also greater than it would be for new games that appeal to more of a 20-something user base.

Martin James: The spending power of those users is also greater than it would be for new games that appeal to more of a 20 something user base. And so both the nature of the game being more narrative based as well as the nature of the audience being a more mature audience a conducive to higher up who now that said if you compare in a dungeon and fighter mobile with other narrative based games in the China market.

Speaker Change #142: Than for those system-based games. In addition, because Dungeon and Fighter mobile is sort of building on 16 years of legacy and specifically of you know many people who played Dungeon and Fighter PC

Speaker Change #142: you know 16 years ago when they were in college and you know are now you know working and they're quite affluent but only have time to play games on mobile phones.

Speaker Change #142: The spending power of those users is also greater than it would be for games that appeal to more of a 20-something user base.

Gary Yu: And so both the nature of the game being more narrative based as well as the nature of the audience being a more mature audience a conducive to higher up. Who now that said, if you compare in a dungeon and fighter mobile with other narrative based games in the China market. Then the user base, the number of dear use is dramatically larger. You know, the game actually has a big audience for a narrative based experience. And you know, we believe that will continue given the nature of the game, given the higher retention rates I talked about earlier.

Unknown Executive: And so both the nature of the game being more narrative based, as well as the nature of the audience being a more mature audience, are conducive to, you know, higher R proof. Now, that said, if you compare Dungeon and Fighter mobile with other narrative-based games in the Chinese market, then the user base, the number of DAUs, is dramatically larger. You know, the game actually has a big audience for a narrative-based experience.

Speaker Change #142: The nature of the game being more narrative-based.

Speaker Change #142: As well as the nature of the audience, being a more mature audience, conducive to higher ARPU. Now, that said, if you compare Dungeon and Fighter Mobile with other narrative-based games in the China market, then the user base, the number of DAUs, is pretty high.

Martin James: Then the user base, the number of dear use is dramatically larger. You know, the game actually has has a big audience for an narrative based experience. And you know, we believe that will continue given the nature of the game, given the higher retention rates I talked about earlier. And, you know, while the output is higher than it is for our biggest systems based games, it's lower than for many narrative based games in China.

Speaker Change #142: dramatically larger, you know, the game actually has has a big audience for a narrative based.

Speaker Change #142: experience.

Unknown Executive: And, you know, we believe that will continue given the nature of the game, given the high retention rates I talked about earlier. And, you know, while the R proof is higher than it is for our biggest systems-based games, it's, you know, lower than for many narrative-based games in China. We think the monetization is fair and sustainable, again, especially in light of the nature of the audience for Dungeon and Fighter mobile.

Speaker Change #142: And we believe that will continue given the nature of the game, given the high retention rates I talked about earlier.

Gary Yu: And, you know, while the output is higher than it is for our biggest systems-based games, it's lower than for many narrative-based games in China. We can monetization is fair and sustainable again, especially in light of the nature of the audience for Dungeon and Fighter mobile.

Speaker Change #142: And, you know, while the ARPU is, you know, higher than it is for our biggest systems-based games, it's, you know, lower than for many narrative-based games in China, we think the monetization is fair and sustainable, again, especially in light of the, you know, nature of the audience for Dungeon Fighter Mobile.

Martin James: We can monetization is fair and sustainable again, especially in light of the nature of the audience for dungeon and fighter mobile. In terms of macro, I would say what we saw is actually pretty consistent with the official consumption number, which is, you know, the second quarter is actually a slowdown from the first quarter. So I think, you know, that's the current trend without, you know, with the government rolling out, you know, more proactive policies and more expansionary policies, then over time, given the resilience of the overall industry as well as entrepreneurs.

Gary Yu: In terms of macro, I would say what we saw is actually pretty consistent with the official consumption number, which is, you know, the second quarter is actually a slowdown from the first quarter. So I think, you know, that's the current trend without, you know, with the government rolling out, you know, more proactive policies and more expansionary policies, then over time, given the resilience of the overall industry as well as entrepreneurs. Entrepreneur environment in China, then we should over time see recovery in terms of the economy as well as consumer consumption.

Unknown Executive: In terms of macro, I would say what we saw is actually pretty consistent with the official consumption numbers, which is, thank you. The second quarter is actually a slowdown from the first quarter. So I think, you know, that's the current trend.

Speaker Change #143: In terms of macro, I would say what we saw is actually pretty consistent with the official consumption number, which is

Speaker Change #143: The second quarter is actually a slowdown from the first quarter.

Speaker Change #144: So I think, you know, that's the current trend. We felt...

Unknown Executive: With the government rolling out, you know, more proactive policies and more expansionary policies. Then, over time, given the resilience of the overall industry, as well as the entrepreneurial environment in China, then we should, over time, see recovery in terms of the economy as well as consumer consumption. So that's what we believe in. But, you know, the weather, you know, at what time, it's not a matter of whether, right?

Martin James: Entrepreneur environment in China, then we should over time see recovery in terms of the economy as well as consumer consumption. So that's, that's what we believe in, but, you know, whether, you know, at what it's not a matter of whether it's a matter of when, you know, and which is sort of have to wait a little bit to see when the conducive policies would actually start using results. Now, in terms of games, I would say, for our games, which are essentially a large DAU long and engagement games, we have pretty low spending per unit of time.

Speaker Change #145: industry, as well as entrepreneurial environment in China, then

Speaker Change #145: We should, over time, see recovery in terms of

Gary Yu: So that's, that's what we believe in, but, you know, whether, you know, at what it's not a matter of whether it's a matter of when, you know, and which is sort of have to wait a little bit to see when the conducive policies would actually start using results. Now, in terms of games, I would say, for our games, which are essentially a large DAU long and engagement games, we have pretty low spending per unit of time. And as a result, this is actually quite resilient in the overall macro environment. And, you know, if we are to see any issue, it probably will be in the low DAU high output games, which are not necessarily 10th and games.

Speaker Change #145: the economy as well as consumer.

Speaker Change #145: Consumption. So that's that's what we believe in. But you know it the weather and you know at what it's not a matter of whether right it's a matter of when you know and we just sort of have to wait a little bit to see when the

Unknown Executive: It's a matter of when, you know, and we just sort of have to wait a little bit to see when the inducive policies actually start yielding results. Now in terms of games, I would say for our games, which are essentially large DAU long engagement games, we have pretty low spending per unit of time. And as a result, we felt that it is actually quite resilient in the overall macro environment. You know, if we are to see any issue, it probably will be in the low DAU, high ARPU games, which are not necessarily Tencent games. And you might want to look at those games as a proxy.

Speaker Change #145: Inducive.

Speaker Change #145: policies would actually start yielding results.

Speaker Change #146: Now, in terms of games, I would say for our games, which are essentially a large DAU, long engagement.

Speaker Change #146: James, we have pretty low spending per unit of time.

Martin James: And as a result, this is actually quite resilient in the overall macro environment. And, you know, if we are to see any issue, it probably will be in the low DAU high output games, which are not necessarily 10th and games. And you might want to look at those games as proxies. And overall, we found, you know, of course, part of the gaming industry is actually driven by macro environments, which, you know, without given sort of the low spending per unit of time, their problem is still some happen before we hit that.

Speaker Change #146: And as a result, we felt this is actually quite resilient.

Speaker Change #146: in the overall macro environment.

James: If we are to see any issue, it probably will be in the low-DAU, high-ARPU games, which are not necessarily Tencent games, and you might want to look at those games as proxies.

Gary Yu: And you might want to look at those games as proxies. And overall, we found, you know, of course, part of the gaming industry is actually driven by macro environments, which, you know, without given sort of the low spending per unit of time, their problem is still some happen before we hit that.

Unknown Executive: And overall, we found that part of the gaming industry is actually driven by macro environments, which, you know, we felt given sort of the low spending per unit time, there probably is still some headroom before we hit that. The more important driver is actually innovation, as I've continually repeated a couple of times. So, you know, when there is continued innovation in the gaming industry, we felt the market would expand, even if the macro environment is actually. Thank you, Martin.

James: And overall, we found, you know, of course, part of the...

James: The gaming industry is actually driven by macro environments, which we felt, given the low spending per unit time, there probably is still some headroom before we hit that. The more important driver is actually innovation, as I've continually repeated a couple of times.

Gary Yu: The more important driver is actually innovation, as I continue to repeat it a couple of times. So, you know, when there is continued innovation in the gaming industry, then we felt the market would expand, even if the macro environment is actually challenging.

Martin James: The more important driver is actually innovation, as I continue to repeat it a couple of times. So, you know, when there is continued innovation in the gaming industry, then we felt the market would expand, even if the macro environment is actually challenging.

Unknown Executive: Thank you, Martin.

James: So, you know, when there is continued innovation in the gaming industry, then we felt the market would expand, even if the macro environment is actually challenging.

Unknown Executive: Thank you, Martin.

Unknown Executive: We are now ending the webinar. Thank you for joining us today. If you wish to check out our press release and other financial information, please visit the IR section of our country website at www.tencent.com. The replay of this webinar will also be available. Thank you, and see you next quarter.

Unknown Executive: We are now ending the webinar. Thank you for joining our results today. If you wish to check out our press release and other financial information, please visit the IR section of our country website at www.cancin.com.

Unknown Executive: We are now ending the webinar. Thank you for joining our results today. If you wish to check out our press release and other financial information, please visit the IR section of our country website at www.cancin.com.

James: Thank you Martin. We are now ending the webinar. Thank you all for joining our results today. If you wish to check out our press release and other financial information, please visit the IR section of our website at www.Tencent.com

Unknown Executive: The replay of this webinar will also be available soon.

Unknown Executive: The replay of this webinar will also be available soon.

Unknown Executive: Thank you and see you next quarter.

Unknown Executive: Thank you and see you next quarter.

James: The replay of this webinar will also be available soon.

James: Thank you and see you next quarter.

James: [inaudible]