Tencent Sees Profit Increase of 61% Thanks to Games Business

Lloyd Doyle
May 16, 2018

Warnings that Tencent, Asia's highest-valued tech company, might suffer a rare poor quarter of business proved unwarranted after the company smashed analyst expectations for its latest earnings thanks to its fast-growing mobile games business.

But the Chinese technology giant dispelled those fears. Revenue grew 48% to 73.53B yuan (consensus: 71.04B). That compares to the 17.4bn-yuan average of estimates compiled by Bloomberg.

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

Revenue breakdown: VAS business, 46.9B yuan (+34%); Online game, 28.8B yuan; Smartphone game, 21.7B yuan (+68%); Social networks, 18.1B (+47%); Online ad business, 10.7B (+55%); Social and others ad, 7.4B (+69%); Other businesses, 15.96B (+111%).

Tencent has historically done well in the games space with the PC its cash cow, but a year ago its smartphone games business overtook that of PC based on revenue.

Its gaming business drove revenues at Tencent during the quarter.

The broader online game business was driven by two major hit games. The first is called "PlayerUnknown's Battlegrounds" or PUBG, which is a massive multiplayer online game.

Tencent has rights to operate that game across China but has said as not yet been monetized, highlighting the potential the title has for the future. It's a tournament-style game that is popular in e-sports, which is competitive video gaming. "Fortnite" was developed by Epic Games, a company that Tencent has a large stake in. PC-based games, meanwhile, took in sales of 14.1 billion RMB ($2.2 billion) to remain flat over the past 12 months.

The company is exploring ways to integrate short video into its social network platforms, Tencent chairman and chief executive Pony Ma Huateng said in March during annual parliamentary meetings in Beijing. It is available as well on mobile. Now unavailable in China, it will be launched in the country within the next few months.

Tencent shares have been under pressure and are down around 17 percent from the record high seen in January.

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.

Other reports by Iphone Fresh

Discuss This Article