Tencent Sees Profit Increase of 61% Thanks to Games Business

18 May, 2018, 09:54 | Author: Billie Castillo
  • Tencent Sees Profit Increase of 61% Thanks to Games Business

Revenue from Value Added Services, which includes online games and messaging, rose 34 percent to 46.9 billion yuan. Tencent executives have signalled a willingness to sacrifice margins in favour of longer-term growth in new businesses, though that would depend on growing and engaging a massive user base now primarily confined to China.

The overall online games business was boosted by two major games. Tencent has the rights to run the game in China but said that it is "yet to be monetized", highlighting the potential future of the title. 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. The tournament-style game is popular amongst the e-sports, which is competitive video gaming.

In late 2017, Tencent Holdings Ltd. became Asia's most highly-valued tech company and the region's second-most valuable public company (behind Alibaba) as the first firm to cross the $500 billion mark.

That game has gone viral with more than 40 million active users monthly across consoles and PCs. Now not available in China, it is scheduled to be launched there during the next couple of months. Earnings reported in the fourth quarter of 2017 underwhelmed investors and concerns were rising that spending increases could hit margins. Instead, the company delivered record quarterly profit and better-than-expected margins. That's despite the company reporting that capital expenditure in the quarter was up 200 percent to 6.3 billion yuan.

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Profit was also helped by one-time gains of nearly 7.6bn yuan from its investments in arenas like video and news.

Tencent had also entered into an agreement with infrastructure firm China Communications Construction to collaborate on connection, data, and integrating digital information technology to help build China's communications infrastructure under the Belt and Road initiative, according to China Communications' website.

Options traders had prepared for a relief rebound, sending the cost of hedging against further losses to the lowest level of the year, while mainland investors also turned bullish - they were net buyers of the stock on Wednesday through a link with Hong Kong for the first time in five days. 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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