Tencent Q2 Profits Beat Estimates Driven By Growth In Gaming And Advertising

A growth in revenues from popular games as well as a rise in online advertising sales helped the Chinese gaming and social media giant Tencent Holdings to comfortably beat analysts’ estimates of profits of the second quarter with a jump of 29 per cent.

The company said a decline in revenues from its battle royale title “Peacekeeper Elite” was offset by a growth in demand and sale of games such as “Honor of Kings” and “PUBG mobile”.

The company also reported net profit 42.6 billion yuan ($6.6 billion) for the three months through June which was above the Refinitiv consensus estimate of 34.4 billion yuan. an increase in the fair value assessment of some of the companies in which Tencent has invested also helped to boost the profits of the company.

There was a 20 per cent jump in revenue to 138.3 billion yuan while there was 13 per cent growth in sale revenue from mobile games.

The results of the company come in the backdrop of several issues being faced by the company in recent months because of a slew of actions by Chinese regulators imposed on the tech industry and other sectors.

The regulator has banned Tencent from striking any exclusive music rights agreements while its planned merger of DouYu International Holdings Ltd and Huya Inc, worth $5.3 billion, was blocked last month by market regulators of China.

Further, following publishing of an article in the Chinese state media in which online games were described as “spiritual opium” and concerns were raised in the article of the impact of such games on children, shares of the company, the largest gaming firm by revenue of the world, took a beating.

That resulted in Tencent temporarily losing its position as the most valuable company of Asia with chipmaker TSMC taking the position earlier this week. The shares of tencent were down by about 8 per cent since the article was published on August 3.

Some new features to reduce the time and money children spend on games have since then been announced by Tencent and the first game to see the changes is the most popular game of the company, “Honor of Kings.”

The moves went “beyond regulatory requirement”, the company said while announcing the earnings.

And in order to showcase that it is contributing to the Chinese economy and society, the company is also was increasingly offering its technologies and expertise to companies and public services, Tencent also stressed in the earnings announcement.

There has been an overreaction of the market to the state media criticism of the gaming industry, some analysts have claimed, and noted that the calls by the Chinese government to protect minors and children from such online games was nothing new and only a small percentage of online gaming revenues was accounted for by such players.

Tencent said only 2.6 per cent of the total gross game receipts in China during the second quarter was accounted for by players under the age of 16 years.

(Adapted from NDTV.com)  

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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