Chinese tech giant and owner of the chat and messaging app WeChat, Tencent, beat analyst expectations for the three months through to the end of June, reporting its fastest growth in revenues for any quarter in about two years.
Despite some weakness in its advertising business, the company’s overall performance and revenues as were boosted by its gaming business.
But this strong performance for the quarter may be overshadowed by the executive order tat was signed last week by the United States president Donald Trump to prohibit any transaction related to WeChat. The ban is expected to come into effect in September.
There was a 40 per cent year on year growth in Tencent’s revenues from its gaming business, at 38.29 billion yuan, once gin underscoring the importance of this business for the overall performance of the company. That growth rate easily beat the first quarter 2020 growth rate of the company in this segment.
It is expected that Tencent will pull in 41.6 billion yuan in online game revenue, according to analysts at China Merchants Securities.
During the first quarter, when millions of people in China and elsewhere were forced to stay back home because of lockdowns imposed to prevent the spread of the novel coronavirrus, there was a surge in demand for Tencent’s gaming software as people turned to its mobile titles.
The company however cautioned that in the near future, the revenues from its gaming business will normalize with normalization in in-game consumption.
Mobile games such as “Peacekeeper Elite” and “Honour of Kings” got a boost during the quarter which helped to offset the fall in sale of PC games of Tencent. There as a 62 per cent year on year rise in smartphone game revenues for the second quarter while there was a 6 per cent year on year drop in revenues from PC games for Tencent.
“In China, user time spent on our smart phone games increased year-on-year but decreased quarter-on-quarter due to seasonality and back-to-office behavior,” Tencent said in its earnings release.
“Internationally, our MAU (monthly active users) increased significantly year-on-year and quarter-on-quarter due to new game launches and more user time spent during the stay-at-home period.”
While about one third of the total revenues accounted for by the company’s online games, the Tencent also some other businesses that have exhibited fast growth.
There was a 29 per cent year on year growth in revenues from its social networking sites at 26.71 billion yuan which was driven by revenue contributions from digital content services including live broadcast service Huya, which Tencent has a large stake in. The music subscription service of the company also contributed to the revenues.
On the other hand, a 30 per cent year on year growth in revenues from the company’s fintech and business services division was reported by Tencent, at 29.86 billion yuan, for the quarter. That growth was also faster than in the first quarter. But it was lower than estimates made by Refinitiv at 30.61 billion yuan. This business includes some of Tencent’s financial technology products like WeChat Pay as well as its nascent cloud computing segment.
(Adapted from CNBC.com)