Chinese online giant Tencent posts 61% rise in net profit

Cornelia Mascio
Mag 16, 2018

Tencent posted a 61 percent jump in net income to 23.3 billion yuan ($3.7 billion) in the three months ended March, outstripping the 17.4 billion-yuan average projection.

Revenue rose 48 percent to 73.53 billion yuan, beating the 70.93 billion yuan average estimate of 14 analysts, according to Thomson Reuters data. The Hong Kong-listed company reported an operating margin of 42 per cent, up 3 percentage points from the same period a year ago. Revenue from smartphone games alone was up more than 68% compared to the same quarter in 2017 to just over 21.7 billion yuan with the help of titles like Honour of Kings.

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

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.

And Tencent's margins have actually expanded, rather than declined-mainly thanks again to its videogame unit. The company announced that had seen growth in the double digits related to the number of daily active users for that game.

China's largest social network and gaming company defied fears that outsized spending would hammer margins.

The overall online games business was boosted by two major games. Tencent has the rights to run the game in China but said that it is "yet to be monetized", highlighting the potential future of the title. The tournament-style game is popular amongst the e-sports, which is competitive video gaming.

That game has gone viral with more than 40 million active users monthly across consoles and PCs.

Earlier this month, an online essay criticised Tencent's apparent focus on investments over product innovation, sparking a heated debate in China.

Shares of Tencent have come under pressure of late and are off by 17% from an all-time high from January. Tencent has big stakes in several notable Chinese companies, including e-commerce giant (JD).

Other earnings drivers for Tencent included a video subscription service that is similar to that of Netflix.

The combined monthly active users of WeChat and Weixin, which is the Chinese version of the app, stood at 1,040 million at the end of March, an increase of 10.9 percent year-on-year, Tencent said in its quarterly report on Wednesday.

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