If we had to encapsulate Tencent's recently released fourth-quarter earnings report in a single word, "flourishing" would be the most apt description.

Whether it's Tencent's 11% year-on-year revenue growth to RMB 172.45 billion in the fourth quarter, its 30% year-on-year net profit increase to RMB 55.3 billion, or its full-year revenue surge of 8% to RMB 660.3 billion, this tech giant is undeniably sprouting new growth.

This represents a revival for Tencent. After years of exploration and experimentation, the company has discovered a development model that suits its unique strengths and resonates with current market trends.

To summarize this model, it involves steadfastly adhering to traditional cash cow businesses while actively fostering the expansion of new ventures.

For Tencent, this earnings report serves as both a recap of recent achievements and a springboard for future endeavors in the burgeoning AI landscape.

Understanding the significance behind Tencent's financial performance and the underlying logic that fuels its cyclical resilience is far more illuminating than merely scrutinizing the numbers.

Especially in the context of Pony Ma and Liang Wenfeng's collaboration and Tencent Yuanbao's advertising push into tier-three cities, this perspective becomes even more compelling.

If all goes as planned, Tencent's resurgence will continue to branch out, ultimately blossoming into a vibrant and enduring spring.

I

Like other internet players, as the internet era wanes, particularly when traditional development models falter, Tencent has also experienced a period of decline.

Unlike competitors that scatter their efforts in various directions, Tencent has a more forward-looking focus.

Whether it's continuous investment in R&D or the quest for new growth areas within existing businesses, these efforts reflect Tencent's commitment to charting new paths based on its unique strengths.

This process has witnessed the gradual rise of video numbers, the maturation of AI applications exemplified by Tencent Yuanbao, and the rejuvenation of traditional businesses through AI integration.

For Tencent, this represents a transformative bridge between past and future.

Placing Tencent's transformation in a broader market context, the company is seeking ways to transition from the internet era to the AI era.

Facts have validated Tencent's strategic acumen.

While traditional cash cow businesses anchor the company's foundation, continuous R&D investments and new venture implementations have opened up fresh possibilities for Tencent.

As this strategy gains traction, Tencent's vision is becoming a reality. The impressive fourth-quarter earnings report is a testament to this transformation.

Standing at this juncture, we can appreciate the depth of Pony Ma's metaphor of Tencent as an "old tree sprouting new buds."

This metaphor signifies maintaining Tencent's established "branches" while continuously nourishing the tree with new growth, ensuring its enduring vitality.

Therefore, to uncover the underlying logic behind Tencent's earnings report, it's crucial to focus on the company's successful navigation from the internet era to the AI era, ensuring the revival of this "old tree."

II

Contrary to Tencent's firm and stable overall strategy, its bold and open approach to new ventures is key to breaking through existing constraints and entering a new development cycle.

It's no exaggeration to say that once Tencent identifies a direction, it dives in swiftly and comprehensively to seize development opportunities, fueling its ability to achieve new growth.

This is evident in the rise of video numbers and Tencent Yuanbao's initiatives.

As short video platforms like Douyin gained traction, altering the traffic landscape fundamentally, embracing short videos to counteract traffic loss became a strategic imperative for internet giants.

For Tencent, embracing short videos rather than capitulating was crucial to maintaining competitive advantage.

Against this backdrop, Tencent has intensified its efforts on video numbers.

From traffic support to exploring commercialization avenues, Tencent has traversed the path that other short video platforms took over several years in just a few years.

Notably, Tencent's turnaround occurred amidst its already established large traffic base. Describing the difficulty of this turnaround as "an elephant turning" is apt.

While Tencent's boldness with video numbers represents an exploration under its established business model, its sustained efforts in AI, particularly its openness to the deterministic direction of deepseek, demonstrate its embrace of emerging trends.

Since the beginning of this year, Tencent has been actively pursuing AI initiatives.

From restructuring, adjusting Tencent Yuanbao's oversight from TEG to CSIG, and transferring teams overseeing products like QQ Browser, Sogou Input Method, and ima, to fully integrating Tencent Cloud, Yuanbao, Tencent Docs, and Tencent Maps into deepseek, and expanding AI R&D and promotion investments, Tencent's boldness in AI is evident.

The earnings report reveals that in 2024, Tencent's capital expenditures surpassed RMB 76.7 billion, a 221% year-on-year increase, reaching RMB 36.587 billion in Q4, a 386% year-on-year surge.

Thanks to Tencent's aggressive AI investment strategy, President Martin Lau revealed that from February to March, Yuanbao's daily active users (DAU) increased 20-fold, making it the nation's third-ranked AI-native mobile app by DAU.

However, Tencent aims for more. The company plans to delve deeper into AI Agents and robotics.

As Pony Ma noted, Tencent has ample scenarios for AI Agent development and believes Agent applications will thrive in the future.

While maintaining a stable overall strategy, Tencent remains bold and open in its tactics, particularly in investing heavily in established businesses. This may be another key factor enabling Tencent to navigate challenges and achieve recovery.

III

Another reason for Tencent's flourishing revival across multiple fronts is its focus not just on stabilizing traditional businesses but also on exploring new cash flow ventures.

Forging new business modules and consistently generating cash flow is pivotal to Tencent's rapid recovery.

This is evident in Tencent's growing TO B business and the new vitality emerging from the WeChat ecosystem.

Tencent's shift from a C-end-driven traditional internet model to focusing on the vast B-end market is significant.

The earnings report shows that Tencent's TO B business, encompassing fintech and enterprise services, generated revenue of RMB 212 billion, accounting for 32% of total revenue.

It's clear that Tencent's TO B business is gaining a larger share of its operations, signaling a move away from the C-end-dominated cash flow model towards a B-end-centric one.

Whether through providing full-link support and driving industry growth with "usable AI" or focusing on independent R&D and launching pioneering products, Tencent is uncovering new blue oceans in the B-end market and exploring new cash flow ventures.

Besides Tencent's growing B-end cash flow capabilities, the new growth potential activated within the WeChat ecosystem is fostering new business modules.

The earnings report indicates that in 2024, Tencent's marketing service revenue increased 20% year-on-year to RMB 121.4 billion.

This growth stems from the comprehensive upgrade of the advertising technology platform, the rise of video number ads, mini-program growth fueled by short dramas and mini-games, and a doubling of search advertising revenue.

A key reason for the significant growth in Tencent's WeChat ecosystem cash flow business is the company's 2024 integration of mini-programs, official accounts, video numbers, search, and other entry points into a unified WeChat ecosystem.

Tencent's exploration of new cash flow ventures within the WeChat ecosystem has uncovered new growth avenues.

Notably, WeChat launched the "Little Blue Bag" gifting feature earlier this year.

While Tencent hasn't disclosed transaction volumes for this feature, President Martin Lau's statements offer insights.

He said the gifting feature on WeChat multiplies the impact of WeChat e-commerce. "When a new user fills in their address through the gifting feature, their transaction success rate will be much higher in future WeChat e-commerce endeavors. Thus, gifting will be part of Tencent's future new infrastructure."

Tencent's forging of new cash flow modules for traditional businesses has injected fresh growth momentum.

Conclusion

Tencent is reviving, flourishing across multiple fronts.

It's safe to say that Tencent has weathered its darkest hour.

As Tencent recovers, we should look beyond the cold, superficial numbers to understand the deeper underlying logic driving these results.

Tencent's strategic restraint, tactical flexibility, and robust exploration of new cash flows illustrate this.

By grasping the underlying logic of Tencent's recovery, we gain a deeper appreciation of the company and why it is what it is.

As Tencent's "old tree" sprouts more branches and ushers in a new era of enduring prosperity, we can better comprehend the essence of Pony Ma's metaphor of "old trees sprouting new buds."

Tencent is becoming evergreen, marking the beginning of its enduring prosperity.