China’s Tencent reports higher than expected second quarter profit on smartphone games revenue

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A Clash of Clans welcome screen is seen on a phone. Tencent invested in Finnish mobile game developer Supercell to expand its presence in the global game industry. Photo: Reuters

Published: 6:45pm, 17 Aug 2016Updated: 11:00pm, 17 Aug 2016

Chinese internet juggernaut Tencent reported a higher-than-expected 47 per cent jump in net profit for its second quarter on the back of strong revenue growth in smartphone games.

The company’s net profit of 10.88 billion yuan surpassed analyst expectations. Analysts polled by Reuters expected the company to report a 34 per cent increase in net profit to 9.81 billion yuan (US$1.48 billion) for the second quarter ended June 30.

Shenzhen-based Tencent’s revenue rose 52 per cent year on year to reach 35.7 billion yuan, with smartphone game revenues growing 114 per cent year on year to 9.6 billion yuan for the period.

The company’s shares fell 1.23 per cent to close at HK$193 in Hong Kong on Wednesday, ahead of the results release. Tencent’s shares have gained 29.5 per cent since the beginning of this year.

In a conference call with analysts, Tencent’s chief strategy officer James Mitchell said the gaming giant will continue to focus on expanding its mobile games portfolio, including those associated with “existing PC or comic book intellectual property”.

He also suggested that Tencent could be looking into mobile games that utilise location-based services (LBS) technology, following US developer Niantic’s success with Pokemon Go, a smartphone game that allows users to catch and battle “pocket monsters” based on their location.

“We’ve been intrigued for some time by the opportunity that surrounds injecting LBS into smartphone games,” Mitchell said.