Tencent advances revenues 48%, profit over 60% in Q1

Isaac Cain
May 17, 2018

Strong revenue from games and advertising lifted revenue and profit margins at Chinese social media giant Tencent.

Value added services businesses expanded their revenues by 34%, games by 26% and advertising by 55%, year-on-year, the company said. 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.

Social networks revenues, including from Tencent's video and music business, increased by 47 percent to 18 billion yuan.

"We expect Tencent to consolidate both the PC and mobile games markets", Alex Yao, a Hong Kong-based analyst at JPMorgan Chase & Co, said in a report.

In a battle for the world's largest mobile payment and retail market, Tencent has splashed out billions forging alliances with new partners like Carrefour and subsidising merchants to lure them onto its payment-to-messenger super app WeChat.

Tencent had warned in March that heavy spending could crimp profit, sending shares sharply lower. That's partly thanks to a one-time gain of nearly 7.6 billion yuan from its investments in arenas like video and news. The first PlayersUnknown's Battleground (PUBG), which is a huge multiplayer game online.

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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. The tournament-style game is popular amongst the e-sports, which is competitive video gaming. (Fortnite is due to launch in China imminently). Epic Games developed Fortnite.

Monthly active user accounts (MAU) declined to 805.5 million, down 6.4 percent from the year before and from 783 million in the previous quarter.

It's estimated that Tencent has acquired stakes in almost 300 companies since 2013, about 50 on average a year.

In late 2017, Tencent Holdings Ltd. became Asia's most highly-valued tech company and the region's second-most valuable public company (behind Alibaba) as the first firm to cross the $500 billion mark.

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

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