Chinese online giant Tencent posts 61% rise in net profit

Shares of Tencent opened up 7 per cent in Hong Kong on Thursday after ithe company reported better-than-expected first-quarter results. Bobby Yip  Reuters

Tencent Sees Profit Increase of 61% Thanks to Games Business

Tencent has historically done well in the games space with the PC its cash cow, but past year its smartphone games business overtook that of PC based on revenue. Last month, Tencent partnered with USA developer Epic Games to launch Fortnite in China. Anchored by its marquee title, the smartphone games business yielded 68 percent growth in the quarter.

Chinese Internet giant Tencent has confirmed that the number of active users on its multi-function messaging app WeChat surpassed one billion during the first quarter.

In the video content sector, Tencent poured a total of $1.1 billion into two rivals in a 24-hour period, investing US$632 million and US$461.6 million respectively in Chinese game-streaming platforms Douyu and Huya in March.

Tencent's other retail partners include Carrefour, Walmart, Yonghui Superstores, Vipshop Holdings, Bubugao and JD.com, who are looking to leverage the internet giant's capabilities in mobile payments, customer acquisition and cloud services. It's a tournament-style game that is popular in e-sports, which is competitive video gaming. Epic Games developed Fortnite.

That game has gone viral with more than 40 million active users monthly across consoles and PCs. It is also on mobile too. Now not available in China, it is scheduled to be launched there during the next couple of months.




"What you are seeing is the "Fortnite" effect, bringing lots of new gamers into e-gaming arena", Campling said.

Shares of Tencent have come under pressure of late and are off by 17% from an all-time high from January. Earnings reported in the fourth quarter of 2017 underwhelmed investors and concerns were rising that spending increases could hit margins. But in the three months ended March 31, Tencent manage to raise its operating margin by 8 percent quarter-on-quarter.

Tencent's other earnings drivers included its video subscription service, which is similar to Netflix.

The results are likely to please Tencent's army of investors. Tencent's operating margin fell in Q4 and earlier this year, the company said it was focusing on investments over short-term margins.

Online advertising was up 55 percent year-on-year in terms of revenues, which was helped by video ads. WeChat had 1.04 billion monthly active users while the mobile version of QQ - the older of its two social networks - saw users drop 6.4 percent to 805.5 million at the end of the quarter.

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