Tencent posts impressive first quarter profit growth

Tencent posts impressive first quarter profit growth

Tencent posts impressive first quarter profit growth

Before the release of the first-quarter report, there had been concerns in the market about a potential slowdown in Tencent's online game income growth. 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. The company has stakes in two of the biggest smartphone games in the world today, PlayerUnknown's Battlegrounds (PUBG) and Fortnite.

Tencent, the world's largest videogame company, has lost nearly $90 billion of its market value since March, due to concerns about slowing growth and shrinking margins. The stock had fallen 16 percent in Hong Kong since a record close on January 23.

Earlier this month, an online essay criticised Tencent's apparent focus on investments over product innovation, sparking a heated debate in China. That compares to the 17.4bn-yuan average of estimates compiled by Bloomberg.

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

Revenue rose 48% to 73.5bn yuan, compared with analyst estimates for 70.8bn yuan. Another title - Honour of Kings - was the world's highest-grossing mobile game a year ago thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

Yet, Tencent managed to come up with another hit title "Fortnite", following the tremendous success of games like "Honour of Kings". Developed by Tencent's own studio, the mobile title resembles the popular desktop title League of Legends, whose developer was acquired by Tencent in 2015. "The increase primarily reflected growth in revenues from digital content services such as live broadcast, video streaming subscriptions and our music service namely WeSing, as well as from in-game virtual item sales", Tencent said.

Jefferies analysts wrote in an accompanying note that Tencent's gross profit margin was higher than expected with its " strong mobile game rebound", but added a structural business mix change might continue to weigh on the firm's margins. And, as this chart from Statista shows, Tencent's three main social media platforms have a combined user base of 2.4 billion, slightly above Facebook's 2.2 billion users.

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