Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Gaming boom plays into Tencent's hands with 89% profit rise

Published 11/12/2020, 03:50 AM
Updated 11/12/2020, 09:05 AM
© Reuters. FILE PHOTO: Logo of Tencent is seen at its booth at the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing

By Pei Li

HONG KONG (Reuters) - Tencent's blockbuster game and solid advertising drove an 89% rise in quarterly profit at the Chinese gaming and social media group, helping it to beat forecasts on Thursday.

With its flagship game Honour of Kings reporting a record 100 million daily active users in the first 10 months of 2020, Tencent, the world's largest gaming firm by revenue, has benefited from growth of paying users for video games.

Tencent said on Thursday its profit was 38.5 billion yuan ($5.8 billion) for the three months through September. That was ahead of an analyst average estimate of 30.81 billion yuan, data from Refinitiv showed. Revenue rose 29% to 125.4 billion yuan.

The Chinese group, which celebrated its 22nd birthday on Wednesday has a solid pipeline of new games waiting to be released, including a testing launch of a mobile version of League of Legends in Asia last month.

Tencent reported a return to normal in advertising activity after the outbreak of the COVID-19 pandemic, with rapid growth in sectors such as education, internet services and e-commerce.

Its shares closed up 4.72%, against a 0.22% decline in the Hang Seng index, rebounding from a 7% drop on Wednesday when investors dumped shares in Chinese tech companies following publication of draft anti-monopoly rules.

These wiped hundreds of billions of dollars off the value of some tech giants including Alibaba (NYSE:BABA).

Tencent President Martin Lau told in a post-results call that the draft anti-trust regulations are not new or unique to China, adding that as tech companies get bigger the new regulations reflect the new reality.

Beijing is still supportive of the industry and Tencent will work with the regulators to ensure compliance, he added.

"For games, which are essentially individual products rather than a platform, I think they are less of a focus," Lau said.

China has also issued draft rules to boost the oversight of online micro-lending, a sector Tencent is also involved in the through WeBank, which derailed Ant Group's blockbuster IPO.

Lau said there will not be a lot of changes in Tencent's fintech strategy as a result of the proposed micro-lending rules and its business is in compliance with regulations.

© Reuters. FILE PHOTO: Logo of Tencent is seen at its booth at the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing

Tencent said revenue from its cloud and other business services, a potential future growth engine, grew more slowly as a result of the lingering impact of the pandemic, with delays in areas such as project deployment and new contract sign-ups.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.