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Tencent blows past estimates as WeChat, games drive growth

17 May 2018
Tencent blows past estimates as WeChat, games drive growth

Social and other advertising sales increased 69 per cent year-on-year as a result of more advertisers on WeChat Moments, the social media platform within its hugely popular messaging service.

Jefferies revised up its 2018 revenue target by 1 per cent and lowered the non-GAAP earnings forecast by 4 per cent to reflect a higher revenue contribution from ad and financial services, they wrote.

Tencent Holdings Ltd. delivered record quarterly profit that reassured investors bracing for a big hit to margins from spending on everything from video to old-school retail.

This is actually a low-risk strategy to participate in growth opportunities.

Revenue rose 48 percent to 73.5 billion yuan, also surpassing estimates for 70.8 billion yuan.

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. Its "Honour of Kings" remains the highest grossing smartphone game in China's iOS Top Grossing Chart, while new tactical tournament games like Fortnite are gaining popularity globally, Lau said. Finally, a fourth game - QQ Speed Mobile - showed promising revenue after being taken from PC to mobile. 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.

Mobile games and online advertising continued to be the main growth engines.

Tencent's gaming business has historically done well, with the PC games segment being the company's cash cow for a long time. Not only can this add to the moat and diversity of Tencent's operations, emerging rivals can also be turned into members of the group at an early stage. Since late March, the shares have seen a sharp reversal, losing about $87 billion in value to leave Tencent with a market capitalisation of about $480 billion.

Looking forward, Tencent CEO Ma Huateng said the company will continue to invest in improving its own products and enabling services for its partners.