Tencent quarterly profit beats estimates on robust gaming and advertising demand
Chinese gaming and social media giant Tencent Holdings beat forecasts with a 29% climb in second-quarter profit, helped by an increase in takings from popular games and growth in online advertising revenue.
Robust demand for games such as “Honor of Kings” and “PUBG mobile” offset a decrease in revenues from its battle royale title “Peacekeeper Elite”.
Net profit for the three months through June came in at 42.6 billion yuan ($6.6 billion), above a Refinitiv consensus estimate of 34.4 billion yuan. Profit was also boosted by an increase in the fair value assessment of some of the companies it has invested in.
Revenue jumped 20% to 138.3 billion yuan with sales from mobile games up 13%.
The results come amid investor concerns that Tencent will continued to be ensnared in an onslaught of regulatory actions that Chinese authorities have unleashed on several sectors with the tech industry being the hardest hit.
In particular, regulators have launched a slew of anti-trust probes, cited the need to boost data privacy and pushed for better treatment of consumers.
Tencent has been barred from entering into exclusive music rights agreements and saw its $5.3 billion plan to merge DouYu International Holdings Ltd and Huya Inc blocked by China’s market regulator last month.
Shares in the world’s largest gaming firm by revenue also took a battering after a state media article described online games as “spiritual opium” and expressed concern about their impact on children.
That fallout saw Tencent temporarily lose its crown as Asia’s biggest company by market capitalisation to chipmaker TSMC earlier this week. Its shares remain down some 8% since Aug. 3 article.
Tencent has since announced new measures to reduce the time and money children spend on games, starting with its most popular game, “Honor of Kings”.
Players aged under 16 accounted for only 2.6% of its gross game receipts in China during the second quarter.
It also last month briefly suspended registrations of new users in mainland China for WeChat, the country’s dominant instant messaging platform, to upgrade its security technology.
Tencent has said the company is very focused on compliance and risk management.
