Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Tencent profit tops forecast as fintech and cloud revenues surge

Stock MarketsMay 15, 2019 10:39AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: A Tencent sign is seen during the fourth World Internet Conference in Wuzhen

By Sijia Jiang

HONG KONG (Reuters) - Tencent Holdings Ltd posted record quarterly profit on Wednesday, smashing market expectations, as the social media and gaming giant booked a rise in the value of its investments while fintech and cloud revenues helped make up for declines in games.

Even so, revenue grew at its slowest-ever rate, as heightened regulatory scrutiny hobbled its gaming operations. That allowed earnings from its nascent financial technology (fintech) and business services to eclipse smartphone games for the first time.

In the three months ended March, Tencent saw 17% growth in net profit to 27 billion yuan ($3.93 billion), beating the 19.4 billion yuan average of 13 analyst estimates compiled by Refinitiv.

Boosting profit was a 46% rise in "net other gains", such as from investments, to 11.1 billion yuan. Revenue, however, came in just shy of analyst estimates at 85.5 billion yuan, with growth at an all-time low of 16%.

Tencent has been hit by a suspension in the approval of new games by China's internet regulator for most of last year, which led to the company posting its sharpest-ever profit drop in the three months through December, and the slowest annual profit growth in 13 years.

Approvals restarted in December, with Tencent receiving permission to launch major title Perfect World Mobile in the January-March quarter.

Tencent, which is seeking to find new revenues by shifting to industrial services, in September reorganized its business and created a Cloud and Smart Industries Group (CSIG).

"FinTech and Business Services", a category disclosed for the first time and which includes payment and cloud services, generated 21.8 billion yuan in the March quarter, up 44 percent.

That was more than smartphone gaming revenue, traditionally Tencent's largest single revenue generator and still the most lucrative business, which fell 2% to 21.2 billion yuan due to fewer new titles.

But president Martin Lau said on an earnings call that its nascent industrial internet business was still loss-making and needed more investment in capital and headcount.

"From an operating perspective the business is still in investment mode, so in addition to the capital expenditure the business is also generating some operating losses," he said.

The firm also said it would release several games in the second quarter and is "in the early stages of experimenting" with season passes for some of its main titles in China after a positive reception for passes in overseas markets.

Chief strategy officer James Mitchell said overseas games now account for a "high single digit" percentage of its gaming revenue.

Tencent waited in vain for over a year for approval to earn money via in-app purchases on its popular game PUBG Mobile. It pulled the game last week and launched approved title "Peacekeeper Elite", also known as Game for Peace, a tactical tournament game similar to PUBG but with a socialist makeover.

Elsewhere, Tencent appears to be taking a hit from a slowing Chinese economy amid a China-U.S. trade war. Its online advertising revenue grew 25% versus 55% in the same period a year earlier, with Tencent blaming a "challenging macro environment" and high comparison base.

Jefferies analyst Karen Chan said advertising revenue was lower than expected, though advertising gross margin improved.

Mitchell said advertising spending from sectors such as automobile, real estate and internet services had dropped, but that Tencent would not aggressively release more advertisement space at the cost of user experience.

Tencent operates China's largest social media platform WeChat, which had 1.11 billion users at the end of March.

Tencent profit tops forecast as fintech and cloud revenues surge

Related Articles

Ant leapfrogs banks to top China fund sale rankings
Ant leapfrogs banks to top China fund sale rankings By Reuters - May 14, 2021

By Andrew Galbraith and Samuel Shen SHANGHAI (Reuters) - Alibaba (NYSE:BABA) affiliate Ant Group became China's largest seller of non-money-market mutual funds in the first...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email