Core Viewpoint - Tencent's Q2 financial report exceeded expectations, highlighting the success of the game "Delta Operation" which has rapidly gained popularity in the gaming market [1][3]. Group 1: Game Performance and Market Potential - "Delta Operation" achieved 12 million daily active users (DAU) in April and surpassed 20 million DAU in July, ranking among the top five in the domestic gaming industry [1]. - The game has become Tencent's new "cash cow" within just 10 months, raising questions about its potential ceiling [1]. - The success of "Delta Operation" is attributed to the resurgence of the shooting game genre, which has been underexplored in the Chinese market despite its popularity in the West [3][6]. Group 2: Game Design and Mechanics - "Delta Operation" features three main gameplay modes, with "Search, Fight, and Retreat" being the most popular, emphasizing high-risk, high-reward gameplay [18][20]. - The game incorporates a unique mechanic where players can lose their equipment upon death, enhancing the tension and excitement of gameplay [23]. - The integration of in-game and out-of-game systems, such as the use of "Havf Coins" for purchasing equipment, creates a dynamic balance in player decision-making [26][28]. Group 3: Social and Marketing Strategy - Tencent aims to position "Delta Operation" as a social phenomenon, similar to "Honor of Kings," by leveraging its strong operational capabilities [31][33]. - The game has gained traction among younger audiences, becoming a new form of social capital among players [33][34]. - Tencent's marketing strategies include offline events, celebrity endorsements, and viral content on social media platforms, contributing to the game's rapid spread beyond traditional gaming circles [33].

Core Insights - The Chinese shooting game market is dominated by realistic shooting games, with Tencent being the leading player, holding a significant share of the top products [1][2][4] - Tencent has a robust pipeline of upcoming shooting games, including both self-developed and overseas licensed titles, indicating a strategic focus on diversifying its offerings [2][3] - The overall landscape of shooting games is evolving, with a shift towards differentiation in gameplay and themes, as companies explore new genres and innovative mechanics [13][30] Tencent's Position - Tencent's dominance in the shooting genre is evident, with several top titles like "Peace Elite" and "Call of Duty Mobile" under its belt, showcasing its strong market presence [1][4] - The company is actively developing new titles that avoid the saturated military realism theme, focusing instead on fantasy and unique gameplay experiences [3][5] - Tencent's upcoming titles include "Rainbow Six" and "The Division: Dawn," which are set to expand its portfolio in the shooting genre [2][3] Industry Trends - The shooting game market is experiencing saturation in the military realism segment, prompting companies to seek differentiation through innovative gameplay and thematic diversity [13][30] - There is a growing trend towards "PVE" and "PVPVE" modes, which may become focal points for future competition, as they cater to diverse player preferences [34][35] - The integration of AI technology in game development is expected to enhance gameplay experiences, leading to new innovations in shooting games [34][35] Global Market Dynamics - The global shooting game market remains dominated by realistic titles, with major franchises like "Call of Duty" and "Battlefield" achieving significant sales [14][16] - Companies like Sony and Microsoft are also exploring new gameplay styles and themes, indicating a broader trend towards diversification in the shooting genre [22][24] - The emergence of new gameplay mechanics, such as "search and rescue" combined with battle royale elements, reflects the industry's shift towards innovative and hybrid gaming experiences [19][30]

Core Insights - The domestic shooting game market is experiencing significant growth from late 2024 to 2025, with Tencent's products like "Delta Action" achieving 20 million DAU within a year, and "Peace Elite" seeing over 30% year-on-year growth in Q2 2025 [1][11][12] - The emergence of the "search, fight, and retreat" gameplay has contributed to this boom, alongside the rapid iteration of "hero shooter" products and the IP development of battle royale games [4][10][19] Industry Trends - The shooting game genre has historically been popular due to its broad audience and rapid adoption of new technologies and gameplay innovations [3][19] - The "search, fight, and retreat" gameplay, which has matured over the past year, is a key factor in the current market prosperity, with many companies launching projects in this category [4][10] Gameplay Evolution - The "search, fight, and retreat" gameplay originated from the 2016 game "Escape from Tarkov," which, despite its complexity, laid the groundwork for this genre [5][7] - The success of "PUBG" in 2017 helped popularize elements of this gameplay, making it more accessible to a wider audience [9][10] Market Dynamics - Major companies like Tencent and NetEase are leading the charge in the "search, fight, and retreat" segment, with Tencent's "Delta Action" achieving significant milestones in DAU and revenue [11][12] - The high entry barriers in the shooting game market mean that only large and mid-sized companies can afford to invest in this genre, limiting competition [12][19] Future Directions - The FPS genre is expected to evolve, with potential shifts towards PvE experiences and narrative-driven gameplay, as the current "search, fight, and retreat" trend may reach its peak [20][22] - The industry is exploring the integration of "search, fight, and retreat" mechanics into various game types, indicating a broader influence on game design [17][19] Financial Insights - In the first half of 2025, shooting games accounted for 6% of the top 100 mobile games by revenue, but contributed 17.03% of total revenue, highlighting the significant financial impact of a few successful titles [27]

Core Viewpoint - Huatai Securities reports that Tencent Holdings' revenue for the second quarter increased by 14.5% year-on-year, driven by growth in various business segments [1] Revenue Growth - Tencent's revenue growth is attributed to the following segments: - Value-added services grew by 16% - Advertising revenue increased by 20% - Financial technology revenue rose by 10% - Corresponding gross profit margins improved by 3.4, 1.9, and 4.5 percentage points respectively [1] Long-term Outlook - Tencent is positioned as a leading developer in the shooting game sector, with expectations for dual growth from players and commercialization due to rapid domestic penetration - Notable game releases include "Delta Action" in July and the upcoming mobile version of "Valorant" on August 19 - Future game reserves include several important shooting and open-world games [1] Revenue Forecast Adjustments - Huatai Securities has raised Tencent's revenue forecasts for 2025, 2026, and 2027 by 2.7%, 4.7%, and 4.8% respectively - The primary driver for this adjustment is the continued expansion of WeChat stores, which is expected to boost advertising and financial technology growth - The company is also anticipated to benefit from ongoing developments in AI products [1] Target Price and Valuation - Based on a sum-of-the-parts (SOTP) valuation, Huatai Securities has increased Tencent's target price from 614.34 HKD to 742.19 HKD - This new target price corresponds to a 2025 price-to-earnings (PE) ratio of 24.3 times, up from the previous 19.9 times - The rating remains "Buy" [1]

Core Insights - NetEase's Q2 2025 revenue and net profit increased year-on-year, with net revenue reaching 27.9 billion yuan, a 9.4% increase, and net profit attributable to shareholders at 8.6 billion yuan, up 26.47% from the previous year [2][5] Revenue Performance - NetEase's Q2 2025 net revenue was 27.9 billion yuan, down from 28.8 billion yuan in the previous quarter but up from 25.5 billion yuan year-on-year [2] - The gaming and related value-added services revenue for Q2 2025 was 22.8 billion yuan, a decrease from 24 billion yuan in the previous quarter but an increase from 20.1 billion yuan year-on-year [3] Game Performance - The classic IP "Fantasy Westward Journey" achieved a record high of 2.93 million concurrent players in August, while mobile game revenue also reached a new high [4] - New titles such as "Yanyun Sixteen Sounds" and "Marvel Showdown" performed strongly, with "Yanyun Sixteen Sounds" surpassing 40 million cumulative users by the end of July [4][5] - The shooting game segment is expected to grow, with multiple new shooting games set to launch in the second half of the year [2][6] Marketing Strategy - NetEase's CEO emphasized a mature strategy for operating both new and old games, focusing on effective marketing through social media and AI tools, with a commitment to reasonable marketing expenditures [2][5] Industry Context - The shooting game market is highly competitive, with major titles from Tencent and other companies performing well, indicating a robust demand for this genre [6][8] - NetEase aims to invest in the shooting game segment, recognizing the high expectations from users regarding quality and innovation [8][9]

Core Insights - Tencent's new game "Delta Action" has quickly become a phenomenon within a year of its launch, contributing significantly to the company's gaming revenue growth [1][5][17] Financial Performance - Tencent reported a 15% year-on-year revenue increase to 184.5 billion yuan in Q2 2025, surpassing market expectations of 178.94 billion yuan [1] - Operating profit (Non-IFRS) rose by 18% to 69.25 billion yuan [1] - Domestic game revenue reached 40.4 billion yuan, up 17% year-on-year, while international game revenue grew by 35% to 18.8 billion yuan [1] Game Performance - "Delta Action" achieved an average daily active user (DAU) count of over 20 million by July, ranking among the top five in the industry for DAU and top three for revenue [5][16] - The game has shown a remarkable 66% increase in DAU within just three months, indicating strong user engagement [5] Market Trends - The success of "Delta Action" reflects a broader trend of rising interest in shooting games within the Chinese market, which is experiencing rapid growth [17][18] - Tencent's executives noted that the Chinese shooting game market is diversifying, with various game modes and styles coexisting without cannibalizing each other [19] Competitive Landscape - Other major companies, including NetEase and various independent studios, are also entering the "looting and extraction" game genre, indicating a competitive environment [15][16] - Tencent's strategy includes launching complementary products like "Rainbow Six: Siege" and "Valorant" mobile versions to enhance its market position [19]

Core Insights - The shooting game genre has become the most popular segment at the recent ChinaJoy event, with major companies like Tencent, NetEase, and Lilith attracting large crowds to their game demo areas [1][2] - The summer gaming market remains competitive, with over ten key products scheduled for release in August, including various genres such as MMORPGs and shooting games [2] Game Releases - On August 7, three major games were launched: Perfect World's "Zhu Xian 2," Lilith's "Light of 84," and NetEase's "Spirit Beast Adventure" [3] - "Zhu Xian 2," a new MMORPG developed by Perfect World, has been in development for over four years and is expected to strengthen the company's position in the genre [3] - NetEase's "Spirit Beast Adventure" is a 3D turn-based pet-catching game set in an Eastern mythology world, featuring strategic battles and social gameplay [3] Upcoming Titles - NetEase plans to begin testing "Destiny: Stars" on August 15, with a global launch expected on August 28. This game is a collaboration with Bungie and is based on the popular "Destiny" IP [4] - Lilith's "Light of 84," a shooting game that combines hero shooting and battle royale elements, is set for public testing on August 7 [4] - Tencent's "Valorant: Source Action," a mobile FPS developed in collaboration with Riot Games, is scheduled for release on August 19, with over 60 million pre-registrations [5] Market Dynamics - The shooting game segment is experiencing intense competition, with many companies launching new titles to capitalize on the summer gaming season and the visibility from ChinaJoy [7] - Despite the crowded market, companies are motivated to innovate and break through existing gameplay limitations, as significant rewards await those who achieve quality and gameplay breakthroughs [7]

Core Insights - The article highlights the significant growth and competition in the shooting game genre, particularly in the mobile gaming sector, with major players like Tencent and NetEase actively expanding their portfolios [1][2][7]. Group 1: User Engagement and Market Dynamics - On June 5, the active user count for "Peace Elite" surpassed 37 million, indicating strong engagement in the shooting game segment [1]. - The National Press and Publication Administration approved 147 domestic and 11 imported games, including several shooting titles, reflecting a robust market for this genre [1]. - The shooting genre accounted for 13.89% of the top 100 mobile games by revenue last year, ranking third, showcasing its significant market share [2]. Group 2: Revenue and Profitability Insights - Despite a focus on user metrics like DAU (Daily Active Users) and MAU (Monthly Active Users), the revenue potential of shooting games, especially on PC, is substantial, as indicated by Tencent's comments on "Delta Force" [2][7]. - In 2024, the tactical multiplayer genre is projected to lead mobile game revenues at 17.99%, followed closely by role-playing games at 17.85% and shooting games at 13.89% [2]. Group 3: Competitive Landscape - The shooting game market is characterized by intense competition among Chinese developers, who are not only competing internally but also vying for market share against established Western companies [9]. - Emerging markets like Russia, Turkey, and Brazil are showing explosive growth in active users for shooting games, indicating a shift in global gaming dynamics [9]. Group 4: Innovation and Long-term Viability - The shooting genre continues to evolve with innovative gameplay, such as the integration of tactical elements and various modes, which keeps the genre fresh and engaging for players [10][12]. - The ability of shooting games to incorporate diverse gameplay elements without alienating core players suggests a strong potential for long-term engagement and revenue generation [13].