Published: Thu, May 17, 2018
Arts&Culture | By Antoinette Montgomery

Chinese online giant Tencent posts 61% rise in net profit

Chinese online giant Tencent posts 61% rise in net profit

The Chinese internet giant blew past estimates by a wide margin, given that analyst forecasts for the earnings had ranged from a one percent decline to a 27.5 percent gain. While WeChat has just passed the billion-user mark and is trailing the world's largest social network by more than a billion users, the company's financial results are almost on par with Facebook's.

WeChat had 1.04 billion users as of March and WeChat Pay is more popular than Alibaba's Alipay in offline payment, though the latter is bigger in overall transaction volume.

Revenue rose 48 per cent to 73.53bn yuan, beating the 70.93bn yuan average estimate of 14 analysts, according to Thomson Reuters data. Tencent attributed the increase to growth in digital content services such as live broadcast, video streaming and in-game virtual item sales, and its Karaoke app WeSing.

Tencent has rights to operate that game across China but has said as not yet been monetized, highlighting the potential the title has for the future.

The company, however, warned that delays in earning revenues from those games in China and heavy marketing expenses are expected to hit mobile games revenue in the short term. "Media advertising revenues increased by 31% to RMB3.30 billion, primarily driven by revenue growth from Tencent Video due to an increase in video views, and new advertising formats within original productions".

Tencent's gaming unit is also benefiting from the explosive popularity of "Fortnite", the multiplayer battle royale game that has taken the world by storm.

Tencent's mobile game branch, which launched a number of new blockbuster games this year, saw a 68% rise in revenue from last year's first quarter. The company is once again worth more than half a trillion dollars. (Nasdaq: FB) as the world's fifth-most valuable company. In the following months, however, the company's shares came under pressure with increasing costs driving investor fear of lower margins.

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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