Tencent smashes forecasts in best-ever quarterly results
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Tencent smashes forecasts in best-ever quarterly results

China’s biggest gaming and social media company, Tencent, has soundly beaten analysts’ expectations with its earnings for the second quarter of 2017. Perhaps more impressively, the company has not only continued a lengthy streak of success, but actually extended it: these are the most positive results Tencent has ever posted. The company saw profit rise by a shocking 70% from the year-ago quarter to 18.23 billion yuan. This is the biggest jump in profit that the company has reported for 7 years, and dwarfs analysts’ predictions of 14.15 billion yuan.

Tencent’s share price is rocketing through 2017, +74% year to date

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SOURCE: Yahoo Finance

Tencent, which is now the most valuable firm listed in Asia, also outperformed on revenue. The company’s revenue has hit a new high every single quarter since 2007, but this year it raised the bar significantly, delivering total revenues of 56.6 billion yuan. That’s a surge of 59% year on year, and an easy beat of the 52.98 billion yuan that analysts were hoping for.

Tencent was strong across the board in the second quarter, but a particular driver of the company’s growth was its biggest mobile game, Honour of Kings. This title has become so ubiquitous in China that state-sponsored media has issued warnings over its “addictiveness”. Evidently, these warnings have not curbed the game’s popularity. It remains tha world’s top grossing mobile game, and Tencent itself has had to introduce curbs on play time for younger gamers.

Overall, the company’s mobile games segment was unsurprisingly strong. It saw a revenue climb of 54% to 14.8 billion yuan, eclipsing the revenue Tencent makes from PC games for the first time ever. That is not to say that PC games underperformed – on the contrary, the company referred to this division as possessing “exceptional strength” in the second quarter of the year.

Online advertising was also a particularly bright spot for the tech giant, with revenue rising by 55% to 10.51 billion yuan. The driver here is a 61% growth in “social and others advertising” – mostly WeChat advertisements.

WeChat itself saw growth. The platform is far and away China’s most powerful social network, and now accounts for about a third of all time spent online in China. Monthly active users of the app hit a new high of 963 million, getting ever closer to the one billion mark.

Tencent is the big name when it comes to mobile in China, so it’s no surprise that the continued proliferation of mobile browsing is playing into the company’s fortune. Along with Alibaba’s Alipay platform, Tencent dominates the mobile payment space, and it now counts 600 million Chinese as users of its WeChat Pay and QQ Wallet services.

Disclosure

Dominion holds Tencent in its Global Trends Managed Fund.


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