Games and Advertising Lift Tencent to Record First Quarter Profit

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On Wednesday, Tencent reported its earnings for the first quarter that beat Wall Street expectations boosted by its hugely successful gaming business.

Facebook and Tencent both generated nearly the same amount of revenue in the first three months of the year. Another title - Honour of Kings - was the world's highest-grossing mobile game a year ago thanks to its China-based users and Tencent has been pushing it to worldwide audiences. The company's revenue rose by 48 percent year-on-year while net profit was up by 61 percent for the same period.

"We expect Tencent to consolidate both the PC and mobile games markets", Alex Yao, a Hong Kong-based analyst at JPMorgan Chase & Co, said in a report.

Between its January peak price of HK$476.6 and a low this year of HK$380 on May 8, Tencent lost US$117 billion in market value. Tencent has exclusive release rights for PUBG in China but says the game is "yet to be monetized", implying future additional revenue stream from the title. Now not available in China, it is scheduled to be launched there during the next couple of months. Asia's largest company by market capitalization, Tencent reported $14 billion debt at the end of March, compared with $16 billion of cash at the same time a year ago. While WeChat has just passed the billion-user mark and is trailing the world's largest social network by more than a billion users, the company's financial results are almost on par with Facebook's.

Tencent Sees Profit Increase of 61% Thanks to Games Business

Mobile games and online advertising continued to be the main growth engines. Meanwhile, Tencent's overall online advertising business achieved 55 per cent year-on-year growth in revenues. Earlier this month it led a US$820 million round of funding in Shenzhen-based UBTECH Robotics, making it the world's most valuable AI start-up with an estimated valuation of US$5 billion.

The company is exploring ways to integrate short video into its social network platforms, Tencent chairman and chief executive Pony Ma Huateng said in March during annual parliamentary meetings in Beijing. Tencent has big stakes in several notable Chinese companies, including e-commerce giant JD.com (JD).

Fortnite is the other game that is driving a strong quarter.


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