Chinese online giant Tencent posts 61% rise in net profit

Tencent growth WeChat

Tencent growth WeChat

While anxious investors had sold off more than US$90 billion of stock since January, Tencent posted a 61 percent jump in net income to 23.3 billion yuan (US$3.7 billion) in the March quarter, outstripping estimates by nearly a third.

Tencent reported net revenue of 73.5 billion yuan (about US$11.6 billion) and a net profit of 23.3 billion yuan (almost US$3.7 billion).

SHARES of Tencent Holdings opened up 7 per cent in Hong Kong on Thursday after it reported better-than-expected first-quarter results.

Smartphone games revenue, the largest revenue contributor, jumped 68 per cent to 21.7bn yuan while revenue from the more lucrative category of PC games was flat at 14.1bn yuan.

Tencent has several different businesses including gaming and advertising, and owns WeChat, the largest messaging app in China.

The gaming business boosted Tencent's revenues in the quarter.

Before the release of the first-quarter report, there had been concerns in the market about a potential slowdown in Tencent's online game income growth. The company's revenue rose by 48 percent year-on-year while net profit was up by 61 percent for the same period.

Tencent has a hand in the two biggest games in the smartphone world today: Player Unknown Battlegrounds (PUBG) and Fortnite .

Yet, Tencent managed to come up with another hit title "Fortnite", following the tremendous success of games like "Honour of Kings". It invested $632 million in game-streaming platforms Douyu in March, $462 million the same month on Huya.

Following this trading update, shares of Tencent jumped 5 per cent by midday trading, to a five-week high. That's despite the company reporting that capital expenditure in the quarter was up 200 percent to 6.3 billion yuan.

Online advertising was up 55 percent year-on-year in terms of revenues, which was helped by video ads.

Due to the fact that social media services such as Facebook, Twitter, Instagram and Snapchat are inaccessible in China, there exists a whole ecosystem of social networking and messaging platforms that are immensely popular in and around China but hardly known anywhere else in the world.

Despite criticism that Tencent has lost its innovation ability and has become more like an investor, the company has proved that its investing activities actually go hand in hand with the development of its core business.

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