Tencent Revenue Growth Strong, But Adjusted Earnings Miss

Alfred Osborne
May 17, 2018

Revenue reached 73.52 billion yuan equal to $11.5 billion compared to expectations on Wall Street of 72.04 billion yuan.

Fortnite, though unavailable in China yet, has gone viral in U.S. and Europe and ranked as the top-grossing game globally in March, according to Superdata.

Tencent's mobile game branch, which launched a number of new blockbuster games this year, saw a 68% rise in revenue from last year's first quarter.

The operating profit surged 59 percent to CNY 30.692 billion while the net profit going 61 percent higher to CNY 23.290 billion. Another title - Honour of Kings - was the world's highest-grossing mobile game previous year thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

Its gaming business drove revenues at Tencent during the quarter. The mobile version of Fornite was an instant hit in the USA market after its March launch, becoming the highest-grossing iOS game there. Naspers Ltd., which as Tencent's top shareholder is often regarded as a proxy for the Chinese firm, rose more than 6 percent Wednesday.

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Tencent had warned in March that heavy spending could crimp profit, sending shares sharply lower.

Honour of Kings continues to be a core source of earnings.

Over the past year Tencent has completed 62 deals involving direct investments and mergers and acquisitions, according to data compiled by Bloomberg.

As our chart illustrates, there's no need for Tencent to shy away from comparisons with the world's largest social networking company. "The increase primarily reflected growth in revenues from digital content services such as live broadcast, video streaming subscriptions and our music service namely WeSing, as well as from in-game virtual item sales", Tencent said. 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. Tencent has big stakes in several notable Chinese companies, including e-commerce giant JD.com (JD).

Tencent is banking next on the latest global phenomenon-"battle royale" games, in which a large group of players shoot each other until only one remains standing.

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