Tencent beats profit expectations with high score from mobile games
The Shenzhen-based company has been on a shopping spree, expanding into different sectors including e-commerce and automobiles
Tencent Holdings, one of China’s biggest internet companies, pulled a first-quarter surprise on Wednesday, announcing a 61 per cent increase in profits on a strong contribution from its mobile games and online advertising businesses.
China’s largest social network operator and video games company reported net income of 23.29 billion yuan (US$3.65 billion) in the quarter ended March 31, beating average market expectations by about 30 per cent. Revenue reached 73.53 billion yuan, up 48 per cent from the same time last year, driven by online advertising, online games and messaging services. The Hong Kong-listed company reported an operating margin of 42 per cent, up 3 percentage points from the same period a year ago.
Its mobile game business reported a 68 per cent increase in revenue year-on-year to 21.7 billion yuan, driven by its blockbuster title Honour of Kings, which remained the highest-grossing smartphone game in China’s iOS App Store, and a newly-released mobile game version of QQ Speed, which has a strong personal computer (PC) player base. PC games remained flat with 14.1 billion yuan in revenue compared to same period a year ago.
Tencent, however, expects its PC game business to benefit from the roll-out of the desktop versions of popular battle royale titles Fortnite and PlayerUnknown's Battlegrounds, which is currently free to play in China.
Company president Martin Lau Chi-ping said in a conference call with analysts on Wednesday that the multiplayer online game PlayerUnknown's Battlegrounds ”will negatively impact our financials in the short term because we have not yet monetised the games in the China market”. He said the game will likely provide “substantial revenue opportunity once we begin monetisation”.