Tencent second-quarter earnings beat market expectations

Tencent second-quarter report

China’s Tencent has reported an increase in its Q2 2019 earnings. The multinational investment holding conglomerate posted a $3.44 billion net profit for the June quarter. Compared to the same period last year, there was a notable 35% increase. This surpassed Bloomberg’s average estimate of $3 billion.

The Shenzhen-based company also announced a $12.92 billion revenue for Q2. If you take a look at the revenue from the same period last year and compare, there has been a 21% increase in 2019. This can be attributed to the growth in digital content, commercial payment services, and mobile gaming.

With these second-quarter earnings, Tencent will continue to pursue the enhancement and development of its services, technologies, and platforms that would benefit its users and customers.

“During the second quarter, we sustained solid user, revenue, and profit growth, and executed on key initiatives amid the challenging business environment,” said Ma Huateng, the chairman and CEO of the company.

In the first quarter of the year, Tencent found itself struggling due to the Chinese government’s crackdown on the video game business that started in 2018. Before any video game can be released and monetized in China, it has to go through an evaluation and pass a strict regulation process. The license approval freeze affected Tencent. Its quarterly sales growth for Q1 2019 was its slowest since it went public back in 2014.

At the beginning of 2019, the Chinese government was able to lift the game approval freeze. Tencent was able to release 10 new game titles that contributed to its second-quarter revenue increase. It was able to maintain revenue growth from one of its popular releases, Honour of Kings.

Tencent was also able to take advantage of the release of a game called Peacekeeper Elite or also known as Game for Peace. This game is similar to another Tencent game entitled PlayerUnknown’s Battlegrounds Mobile that was never approved in China for monetization. Tencent removed that game from the Chinese market and replaced it with Game for Peace.

In the first three days of its release, it was able to earn $14 million. Since the release of Game of Peace in May, it has an average daily user of 50 million. This has contributed to the company’s total games revenue.

In the second quarter, Tencent was able to record an 8% increase in its year-on-year total online game revenues. This generated about $3.9 billion. The company also saw an increase with its smartphone gaming as well.

In July, the company released three smartphone games – Dragon Raja, Game of Thrones: Winter is Coming, and KartRiderRush. All three titles ranked in iOS Grossing Chart for games in the country. Tencent’s smartphone gaming division recorded a $3.1 billion year-on-year revenue with its 26% increase.

While gaming plays a big role in Tencent’s revenues, the Chinese company has also looked into other sectors to expand its reach. It has invested heavily in cloud computing and financial technology.

In the second quarter, this division of Tencent has managed to grow by 37%, garnering a year-on-year revenue of around $3.3 billion. Based on revenue share, this division comes second to gaming.

Tencent has also seen an increase in its social media revenues. As China’s largest social media platform, WeChat grew by 23%. This is due to the increasing monthly active user base. WeChat currently has more than a billion users and this number continues to climb.

As for Tencent’s Digital Content division, it has seen a 10% year-on-year increase. This can be due to music and video subscriptions. While its video subscriber base has slowed down, Tencent was able to solidify its partnership with the NBA.

In the 2018-2019 season of the NBA, more than 490 million people watched an NBA game or two from Tencent’s platforms in China. This was considered as a win for both Tencent Sport and the NBA. It increased monetization, brand power, and fan engagement.

With Tencent Sport hailed as the number destination for sports fans in China, this has contributed to subscription and advertising revenues. This also paved the way for a partnership between Tencent and the NBA. The Chinese company will be working with the NBA in coming up with eSports events and basketball-themed games for smartphones.

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