Friday, 22 June, 2018

Games and Advertising Lift Tencent to Record First Quarter Profit

Frost & Sullivan’s Ajay Sunder weighs in on Tencent’s record quarterly profit Frost & Sullivan’s Ajay Sunder weighs in on Tencent’s record quarterly profit
Nicole Thomas | 17 May, 2018, 17:18

Tencent had warned in March that heavy spending could crimp profit, sending shares sharply lower.

However, those feats were dispelled by the technology giant. Operating margin increased to 42% from last year's first quarter of 39%.

Revenue reached 73.53 billion yuan, up 48 per cent from the same time a year ago, driven by online advertising, online games and messaging services. Tencent attributed the increase to growth in digital content services such as live broadcast, video streaming and in-game virtual item sales, and its Karaoke app WeSing. In a statement accompanying the earnings report, Tencent Chairman and CEO Ma Huateng said, "In the first quarter of 2018, we launched the popular tactical tournament mobile games and enhanced the capabilities of widely-used services such as our Weixin Mini Programs, deepening engagement across our social, games and media platforms".

Revenue from PC games was flat compared to past year, but analysts believe the comparison was tough with the 2017 first quarter, and overall its games business was strong.

"We expect the share price to bounce back after a period of weakness recently, but as game business prospects may not be as good as 1Q results seemed to indicate, we suggest not riding if the share price rebounds strongly", she wrote in a note. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months. Tencent owns a stake in Epic Games, the developer of "Fortnite".

Tencent Sees Profit Increase of 61% Thanks to Games Business
Tencent profit jumps 61% to $3.7B as its mobile gaming business surges

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.

That game has gone viral with more than 40 million active users monthly across consoles and PCs. Now not available in China, it is scheduled to be launched there during the next couple of months.

Tencent finished the day 3.74 per cent higher at HK$411 after surging as much as 7.07 per cent in its biggest daily rise since August 2015.

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

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