Published: Wed, May 16, 2018
Business | By Tara Barton

Tencent Revenue Growth Strong, But Adjusted Earnings Miss

Tencent Revenue Growth Strong, But Adjusted Earnings Miss

Revenue rose 48% to 73.5bn yuan, compared with analyst estimates for 70.8bn yuan. Another title - Honour of Kings - was the world's highest-grossing mobile game past year thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

Tencent posted a 61 percent jump in net income to 23.3 billion yuan ($3.7 billion) in the three months ended March, outstripping the 17.4 billion-yuan average projection.

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

Smartphone game revenue soared while PC gaming revenue was flat as PC gaming users fell.

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The broader online game business was driven by two major hit games. The first PlayersUnknown's Battleground (PUBG), which is a huge multiplayer game online.

"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. The tournament-style game is popular amongst the e-sports, which is competitive video gaming. "Fortnite" was developed by Epic Games, a company that Tencent has a large stake in. 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. It is also on mobile too. (Fortnite is due to launch in China imminently).

Shares of Tencent have come under pressure of late and are off by 17% from an all-time high from January. That's despite the company reporting that capital expenditure in the quarter was up 200 percent to 6.3 billion yuan. The Chinese giant said that mobile daily video views were up over 60 percent year-on-year in the first quarter. The company's investment in original content helped drive paid video subscriptions up 85 percent on the year.

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. That was buoyed by a one-time gain of nearly 7.6 billion yuan as the value of investments in arenas from video streaming to news content rose. One is an instant messanger known as QQ and the other is called WeChat, similar to WhatsApp but with payments, games and other services integrated.

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