Warnings that Tencent, Asia’s highest-valued tech company, might suffer a rare poor quarter of business proved unwarranted after the company smashed analyst expectations for its latest earnings thanks to its fast-growing mobile games business.
The company reported a net profit of 23.29 billion CNY ($3.7 billion) on revenue of 73.53 billion yuan ($11.5 billion) — beating a Thomson Reuters estimate of 71.04 billion CNY revenue. Net profit was up 61 percent year-on-year, while revenue increased 48 percent over the same period.
Tencent has historically done well in the games space with the PC its cash cow, but last year its smartphone games business overtook that of PC based on revenue.
The gap is now becoming noticeable and there’s plenty of scope for it to increase further.
Tencent has a hand in the two biggest games in the smartphone world today: Player Unknown Battlegrounds (PUBG) and Fortnite. The company secured the rights to distribute both ‘battle royale’ games in China and beyond and said it is just beginning to monetize them. (Fortnite is due to launch in China imminently). Another title — Honour of Kings — was the world’s highest-grossing mobile game last year thanks to its China-based users and Tencent has been pushing it to worldwide audiences. Finally, a fourth game — QQ Speed Mobile — showed promising revenue after being taken from PC to mobile.
Tencent said mobile game revenue hit 21.7 billion RMB ($3.4 billion) during the quarter, up 68 year-on-year. PC-based games, meanwhile, took in sales of 14.1 billion RMB ($2.2 billion) to remain flat over the past 12 months.
Elsewhere, the company said that its WeChat messaging service surpassed one billion active user accounts for the first time. Also in WeChat, the company has built upon its Mini Program feature — which lets developers create apps that tie into WeChat — by introducing Mini Games, there are currently over 500. It also merged WeChat Pay, its mobile payment service which supports offline, with Mini Programs.