Improving the Quality of Internet Enterprise Growth

Tech 2023-10-05 19:26:05 Source: Network

Recently, the disclosure of semi annual reports by internet companies has come to an end. According to financial reports, internet companies such as Alibaba, Tencent, Baidu, JD

Recently, the disclosure of semi annual reports by internet companies has come to an end. According to financial reports, internet companies such as Alibaba, Tencent, Baidu, JD.com, Pinduoduo, and Meituan seized the opportunity of steady domestic macroeconomic recovery, focusing on technological innovation, optimizing organizational structure, and creating new growth engines. Most of the first half of the year's performance returned to positive growth, especially in the second quarter, which exceeded market expectations. Experts say that as domestic consumption vitality continues to recover, internet companies may further unleash their potential, and industry performance is expected to maintain stable growth in the second half of the year.

Consumer recovery drives growth

Since the beginning of this year, internet companies have steadily advanced and the quality of growth has continued to improve.

Revenue has increased. In the first half of the year, Tencent's total revenue was 299.2 billion yuan, an increase of 11% year-on-year; Baidu's revenue reached 65.2 billion yuan, a year-on-year increase of 12.3%; Pinduoduo achieved a revenue of 89.918 billion yuan, a year-on-year increase of 62.8%; Meituan's revenue was 126.582 billion yuan, a year-on-year increase of 30.2%.

The increase in net profit is more significant. In the first half of the year, Tencent's profit attributable to equity holders in accordance with non international financial reporting standards was 70.1 billion yuan, a year-on-year increase of 31%; Baidu's net profit was 11.03 billion yuan, a three fold increase year-on-year; Pinduoduo achieved a net profit attributable to the parent company of 21.209 billion yuan, a year-on-year increase of 84.49%; Meituan had an adjusted profit of 13.151 billion yuan and an adjusted net loss of 1.528 billion yuan in the same period last year.

From a quarterly perspective, in the second quarter, most internet companies achieved significant growth in both revenue and profit. Alibaba's revenue reached 234.16 billion yuan, a year-on-year increase of 14%; The net profit was 33 billion yuan, a year-on-year increase of 63%. Tencent achieved a revenue of 149.08 billion yuan, an increase of 11% year-on-year; The net profit was 37.548 billion yuan, a year-on-year increase of 33%. JD Group's revenue was 287.9 billion yuan, a year-on-year increase of 7.6%; The net profit was 8.6 billion yuan, a year-on-year increase of 32%. Baidu achieved a revenue of 34.1 billion yuan, a year-on-year increase of 15%; The net profit attributable to Baidu was 8 billion yuan, a year-on-year increase of 44%. Meituan achieved a revenue of 68 billion yuan, a year-on-year increase of 33.4%; The operating profit was 4.71 billion yuan, turning losses into profits year-on-year.

The industry believes that the stable growth of various businesses of internet companies in the first half of the year mainly benefited from the recovery of domestic consumption. The arrival of the traditional consumption peak season has enabled Meituan's various businesses to achieve healthy growth. "Meituan CEO Wang Xing said that with the steady recovery of the local living market, Meituan will continue to focus on the" retail+technology "strategy to meet the increasingly diverse consumption needs of users.

Wang Liting, Chief Analyst of Wholesale and Retail Social Service Research at Haitong Securities, believes that due to its excellent business model and continuous iteration of its organizational structure and business, internet companies have shown strong resilience in the current macro environment. Considering the subsequent repurchase and dividend plans of leading companies, the cost-effectiveness of this sector's valuation is worthy of attention.

Since the beginning of this year, internet companies have deeply tapped into the value of existing users, continuously improved supply chain levels, adjusted organizational structures to meet market demand, and stimulated internal vitality. "Zhao Lingyi, a researcher at Shenyin Wanguo Securities, said that on the revenue end, various platforms have increased from front-end traffic to the number of merchants, and the growth engine has restarted; On the profit side, the growth of various platforms has been enhanced, maintaining profitability and improving the efficiency of cost investment. The overall cost investment is controllable and has not had a significant impact on performance, with generally exceeding expected profit performance.

Main business is improving comprehensively

With the recovery of the external environment and market demand, the main businesses of internet companies such as advertising and online marketing have significantly rebounded in the first half of the year.

Tencent's advertising revenue recovered strongly in the second quarter, with a year-on-year increase of 34% to 25 billion yuan; The real economy maintained steady growth, with revenue increasing by 15% year-on-year to 48.64 billion yuan, becoming a highlight of Tencent's business sector.

Pinduoduo's online marketing and other service revenue in the second quarter was 37.9328 billion yuan, a year-on-year increase of 50%; The revenue from transaction services was 14.35 billion yuan, a year-on-year increase of 131%. In the second quarter, consumer willingness warmed and consumer demand for multiple product categories continued to increase. "said Chen Lei, CEO of Pinduoduo, this positive change was mainly due to effective macro policies and promotional activities to support consumption.

Thanks to continuous R&D investment and solid technological strength, some internet companies have achieved quality and efficiency improvement. Tencent has invested 31.191 billion yuan in research and development in the first half of the year, and has implemented industry wide model solutions in more than 10 industries, laying the foundation for future growth. In the second quarter, Tencent Financial Technology and enterprise service revenue increased by 15% year-on-year to 48.64 billion yuan, making it the sector with the largest contribution to performance revenue for the quarter.

Baidu AI Cloud, intelligent driving and other businesses also ushered in outstanding progress. In terms of intelligent driving, Baidu's autonomous driving travel service platform, Radish Run, has rapidly expanded its operational scale. In the second quarter, Radish Run provided 714000 ride services, a year-on-year increase of 149%. The revenue of Baidu AI Cloud in the second quarter was 4.5 billion yuan, up 5% year on year.

By building a more open ecosystem, optimizing organizational and business structures, some internet companies have achieved new business breakthroughs.

Since JD launched a series of merchant support measures such as the "Spring Dawn Plan" at the beginning of the year, merchants have been actively entering, with a year-on-year growth rate of 417% in the number of new merchants in the second quarter, which is accelerating compared to the first quarter. Xu Ran, CEO of JD Group, stated that this achievement fully reflects JD's efforts in building an open ecosystem and empowers JD to provide users with a variety of product choices with better cost-effectiveness.

Alibaba launched the "1+6+N" organizational transformation in March, aiming to maximize organizational vitality and unleash productivity. A quarter has passed, and Alibaba's self transformation has shown initial results: Taotian Group continues to adhere to user first, ecological prosperity, and technology driven, with quarterly revenue increasing by 12% year-on-year; The AI craze has brought demand for computing power and model services, and Alibaba Cloud's revenue and profits have both increased; Offline consumption has rebounded and recovered, with local living group revenue increasing by 30% year-on-year, and large cultural and entertainment group revenue increasing by 36% year-on-year.

Creating a Second Growth Curve

In the second quarter, Tencent's overseas gaming industry maintained strong growth, with newly launched self-developed products rapidly opening up the market. The international market revenue reached 12.7 billion yuan, a year-on-year increase of 19%, accounting for 28.5% of Tencent's total gaming revenue, an increase from the previous quarter, and consolidating its role as the "second growth curve" in the gaming sector.

Alibaba International Business has become a new engine of performance growth. Since the beginning of this year, Alibaba International Digital Business Group has focused on supporting small and medium-sized enterprises and brand merchants to serve global buyers and consumers, achieving strong growth. In the second quarter, Alibaba International Digital Business Group's revenue increased by 41% year-on-year, with international retail business revenue growing rapidly by 60% year-on-year and orders increasing by about 25% year-on-year.

The rapid development of generative AI and big language models has also opened up new market opportunities for internet companies. "Baidu keeps upgrading its model, generating more creative answers, improving training speed and reducing reasoning costs, and keeping ahead of the industry. Wenxin large models 3.5 has been widely recognized by cloud customers, AI developers and industry experts." Robin Lee, founder, chairman and CEO of Baidu, said.

Looking ahead to the performance in the second half of the year, industry expectations are optimistic. Zhao Lingyi believes that the expected increase in consumer vitality in the second half of the year will boost the growth potential of the internet e-commerce industry. Each platform adheres to the equal emphasis on incremental development and stock operation, and the initial investment is expected to further transform into substantial performance growth, driving the accelerated recovery of company value.

In the long run, there is still significant room for improvement in the penetration rate of the internet e-commerce industry, "said Ding Zhechuan, an analyst at China Merchants Securities. Compared to physical retail, internet e-commerce can better meet the needs of consumers in terms of quantity, speed, quality, and economy, and can maintain a growth rate higher than that of the retail market. At the same time, various internet e-commerce platforms are continuously optimizing their supply chains, exploring emerging business models such as live streaming and instant retail, which are expected to drive further growth in low penetration categories. In the first half of the year, the overall profits of internet companies exceeded expectations. If market demand further improves in the future, it is expected that the profits of several top companies will still maintain stable growth throughout the year.

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