Chinese online giant Tencent posts 61% rise in net profit

Tencent is back in the $500 billion club. The Chinese tech conglomerate which owns the popular We Chat and QQ messaging and payment apps and a host of top mobile games reported earnings that topped forecasts

Chinese online giant Tencent posts 61% rise in net profit

Chinese social media and gaming giant Tencent Holdings clocked a better-than-expected 61 per cent jump in quarterly net profit and its first sequential gross margin rise in almost 3 years, driven by a jump in mobile gaming revenue and investment gains. However, in its earnings report for Q1 2018 released earlier today, Tencent laid all those fears to rest, smashing analyst expectations to post some of its highest ever revenue and profit increases, buoyed by a skyrocketing mobile games market.

Tencent has rights to operate that game across China but has said as not yet been monetized, highlighting the potential the title has for the future. That represented a quarter-on-quarter rise of 12 per cent. PC games remained flat with 14.1 billion yuan in revenue compared to same period a year ago. Tencent owns a stake in Epic Games, the developer of "Fortnite".

"It is a matter of a fact that the competition is actually very heavy, there have been a lot of subsidies provided in the market by our market peers, and as a result we have to follow suit", Tencent President Martin Lau said on an earnings call. The market had also anxious that Tencent's spending plans for its videos, artificial intelligence and mobile payments could hurt its margins. Net profits increased 65% year-on-year to reach $3.82 billion on revenues of $11.7 billion in the three months to end of March.

Shares of Tencent, run by China's richest man, Ma Huateng (aka Pony Ma), rose more than 6% Wednesday thanks to the solid results. Not only is it increasing spent heavily on original content creation, it has invested in other streaming platforms. Meanwhile, Tencent's overall online advertising business achieved 55 per cent year-on-year growth in revenues.

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Tencent's shares have fluctuated sharply this year.

Tencent has several different businesses including gaming and advertising, and owns WeChat, the largest messaging app in China.

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. 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.

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

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