Tencent revenue tops estimates due to mobile games
Tencent revenue tops estimates due to mobile games
WeChat now has more than a billion users
16 May, 2018, 23:05
Chinese social media and gaming giant Tencent Holdings clocked a better-than-expected 61 per cent jump in quarterly net profit and its first sequential gross margin rise in almost 3 years, driven by a jump in mobile gaming revenue and investment gains. The mobile version of Fornite was an instant hit in the U.S. market after its March launch, becoming the highest-grossing iOS game there. The company secured the rights to distribute both "battle royale" games in China and beyond and said it is just beginning to monetize them. That represented a quarter-on-quarter rise of 12 per cent. Last month, Tencent partnered with United States developer Epic Games to launch Fortnite in China.
Smartphone games revenue, the largest revenue contributor, was 21.7 billion yuan in the quarter.
Tencent has invested heavily in video in the past year. The owner of the giant WeChat messaging platform opened its wallet to sustain growth as PC gaming slows, investing in cloud computing, entertainment and physical retail to lock horns with Alibaba Group Holding Ltd.
Tencent has been on a shopping spree, expanding into different sectors including e-commerce and automobiles.
Net income climbed 61% to 23.3bn yuan (US$3.7bn) in the three months ended March, the Shenzhen-based company said on Wednesday.
Earlier this month, an online essay criticised Tencent's apparent focus on investments over product innovation, sparking a heated debate in China.
Honour of Kings continues to be a core source of earnings.
Social and other advertising sales increased 69 per cent year-on-year as a result of more advertisers on WeChat Moments, the social media platform within its hugely popular messaging service. Revenue was 48% up on a year on year basis.
Over the past year Tencent has completed 62 deals involving direct investments and mergers and acquisitions, according to data compiled by Bloomberg.
Tencent continues to draw the lion's share of its business from gaming, while counting on advertising and finance via WeChat to drive future growth.
That game has gone viral with more than 40 million active users monthly across consoles and PCs. That was followed by a $95 million stake in online short video platform Pear, after the end of the quarter. Since late March, the shares have seen a sharp reversal, losing about US$87 billion in value to leave Tencent with a market capitalisation of about US$480 billion. In retail and e-commerce - traditionally viewed as rival Alibaba Group's turf - it has splashed out billions since 2017 on deals at home and overseas.
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