Tencent Sees Profit Increase of 61% Thanks to Games Business

Tencent Sees Profit Increase of 61% Thanks to Games Business

Tencent Sees Profit Increase of 61% Thanks to Games Business

China's largest social network operator 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 previous year, driven by online advertising, online games and messaging services.

Bernstein analysts estimate Tencent's merchant subsidy will be around $1 billion in 2018 while subsidies by Alibaba's Ant Financial Services affiliate could be as high as between $2 and $4 billion.

There's an argument to be made for stripping out extraneous items because Tencent runs the games and social side of the business itself, but doesn't have direct control over investees. In retail and e-commerce - traditionally viewed as rival Alibaba Group's turf - it has splashed out billions since 2017 on deals at home and overseas.

WeChat had 1.04 billion users as of March and WeChat Pay is more popular than Alibaba's Alipay in offline payment, though the latter is bigger in overall transaction volume.

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Shares of Tencent Holdings opened up 7 per cent in Hong Kong on Thursday after it reported better-than-expected first-quarter results.

Tencent's other retail partners include Carrefour, Walmart, Yonghui Superstores, Vipshop Holdings, Bubugao and JD.com, who are looking to leverage the internet giant's capabilities in mobile payments, customer acquisition and cloud services.

He added that Tencent's WeChat ecosystem gives it a unique position to take advantage of an enlarged market.

Revenues totaled 73.53 billion yuan ($11.5 billion) versus a Thomson Reuters estimate of 71.04 billion yuan.

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The company, however, warned that delays in earning revenues from those games in China and heavy marketing expenses are expected to hit mobile games revenue in the short term. The increase there was mainly driven by growth at smartphone games, including existing titles such as Honour of Kings and newly launched titles MU Awakening and QQ Speed Mobile. Tencent has the rights to run the game in China but said that it is "yet to be monetized", highlighting the potential future of the title.

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

Tencent's shares have fluctuated sharply this year. It has developed a mobile version of the former that is available globally, while it owns almost half of Epic Games, the developer of Fortnite.

The game has gone viral and has over 40 million monthly active users across PC and consoles. (Nasdaq: FB) as the world's fifth-most valuable company. But Thursday's gain, while translating into a roughly $30 billion (Dh110bn) increase in market value, only helped Tencent recoup a slice of the more than $90bn lost since peaking in January.

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