Published: Thu, May 17, 2018
Culture&Arts | By Hattie Nash

Tencent's Record Profit Soothes Fears of Margins Squeeze

Tencent's Record Profit Soothes Fears of Margins Squeeze

PC client game revenues were broadly while social network revenues advanced 47 percent, pushed primarily by growth from digital content services such as live broadcast, video streaming subscriptions and music service WeSing, as well as from in-game virtual item sales.

"In the first quarter of 2018, we launched the popular tactical tournament mobile games and enhanced the capabilities of widely-used services such as our Weixin Mini Programs, deepening engagement across our social, games and media platforms", said Tencent CEO Mr. Ma Huateng. That helped drive a 55% local currency gain in advertising revenue to 10.69 billion yuan. Capex jumped 200 percent to CNY 6.318 billion.

Tencent's shares have fluctuated sharply this year.

Still, shares of the company are still over 12 percent lower from the record high hit in January.

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Revenue rose 48 percent to 73.5 billion yuan, also surpassing estimates for 70.8 billion yuan.

But it adjusted earnings of 1.915 yuan, which is equal to 30 cents.

Powered by mobile games, Tencent's online games division raked in 28.8 billion yuan in revenue in the first quarter, posting a 26 percent year-on-year gain. The company has however been leery of barraging its users with ads - on Wednesday, it declared it had raised the maximum number of ads that customers see on WeChat Moments, a function similar to Facebook's newsfeed, to just two a day from one previously.

Honour of Kings continues to be a core source of earnings.

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Tencent's PC games reported flat revenue of 14.1 billion yuan. Another title - Honour of Kings - was the world's highest-grossing mobile game past year thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

But overall costs surged 51 percent. 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.

"Mobile game growth was very strong, as the first quarter is usually a good season when users spend more time on their devices during the holidays", said Benjamin Wu, a Shanghai-based analyst with Pacific Epoch.

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