Tencent blows past estimates as WeChat, games drive growth

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Tencent blows past estimates as WeChat, games drive growth

On Wednesday, Tencent reported its earnings for the first quarter that beat Wall Street expectations boosted by its hugely successful gaming business. Net profits increased 65% year-on-year to reach $3.82 billion on revenues of $11.7 billion in the three months to end of March.

Revenue rose 48 per cent to 73.53bn yuan, beating the 70.93bn yuan average estimate of 14 analysts, according to Thomson Reuters data.

Value added services businesses expanded their revenues by 34%, games by 26% and advertising by 55%, year-on-year, the company said. That represented a quarter-on-quarter rise of 12 per cent.

Its mobile game business reported a 68 per cent increase in revenue year-on-year to 21.7 billion yuan, driven by its blockbuster title Honour of Kings, which remained the highest-grossing smartphone game in China's iOS App Store, and a newly-released mobile game version of QQ Speed, which has a strong personal computer (PC) player base.

Operating margin rose to 42 percent from 39 percent in the first quarter of past year.

Tencent, owner of the giant WeChat messaging and social network platform, has been opening its wallet to sustain growth as gaming from desktop gaming slows. The company announced that had seen growth in the double digits related to the number of daily active users for that game. The company secured the rights to distribute both "battle royale" games in China and beyond and said it is just beginning to monetize them. The first is called "PlayerUnknown's Battlegrounds" or PUBG, which is a massive multiplayer online game.

Tencent's other retail partners include Carrefour, Walmart, Yonghui Superstores, Vipshop Holdings, Bubugao and JD.com, who are looking to leverage the internet giant's capabilities in mobile payments, customer acquisition and cloud services. It has developed a mobile version of the former that is available globally, while it owns almost half of Epic Games, the developer of Fortnite. The company's investment in original content helped drive paid video subscriptions up 85 percent on the year.

That game has gone viral with more than 40 million active users monthly across consoles and PCs. Now unavailable in China, it will be launched in the country within the next few months. That's still not cheap: But investors can now expect a return to the good old days of Tencent's shares heading ever higher.

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