Tencent misses estimates with a 13 per cent decline in quarterly profit

14-Nov-2019 Intellasia | South China Morning Post | 6:02 AM Print This Post

Third-quarter revenue increased 21 per cent to 97.2 billion yuan, but it was still below analysts’ estimate of 99 billion yuan

Tencent Holdings, operator of China’s biggest video gaming and social media businesses, missed estimates to post lower-than-expected earnings for the third quarter, dragged down by weak media advertising and desktop games results.

The Hong Kong-listed internet giant reported after the close of trading on Wednesday a net profit of 20.4 billion yuan (US$2.9 billion) in the quarter ended September 30, down from 23.3 billion yuan in the same period a year ago, as media advertising fell 28 per cent to 3.7 billion yuan. That was below the 23.5 billion yuan average from analysts’ estimates compiled by Bloomberg.

Total revenue increased 21 per cent to 97.2 billion yuan, up from 80.6 billion yuan a year earlier, but this was still below analysts’ consensus estimate of 99 billion yuan.

Tencent chair and chief executive Pony Ma Huateng, however, saw “sustained healthy growth rates” in the company’s operating and financial metrics. “Notably, our fintech and business services and advertising segment revenues each increased at double-digit percentage rates from the second quarter, thanks to rising user activity and improved advertising technology,” Ma said in a statement.

He said that showed “the strength of our new businesses” as well as the diversity of Tencent’s operations. Tencent’s shares slipped nearly 1 per cent to close at HK$327.40 on Wednesday.

The Shenzhen-based company’s latest quarterly results also showed that its video games business was recovering after a regulatory crackdown on internet content and initiatives to stem gaming addiction, which included suspending the licensing process for new games for nine months last year. Licensing was restarted in December.

Total online games revenue increased 11 per cent to 28.6 billion yuan, but revenue from personal computer games decreased 7 per cent to 11.5 billion yuan. Smartphone games, by comparison, increased revenue by 25 per cent to 24.3 billion yuan.

Apart from domestic hits Honour of Kings and Peacekeeper Elite, Tencent continued to score big outside China with PUBG Mobile, its smartphone version of popular battle royale game PlayerUnknown’s Battlegrounds. First released for iOS and Android users last year, PUBG Mobile was the second most downloaded mobile game worldwide in the third quarter, with more than 94 million new installations, according to apps analytics firm Sensor Tower.

“New mobile games KartRider Rush, Dragon Raja and Ace Force released during summer were well received, which helped offset the weakness of Perfect World Mobile,” said Jefferies analysts Thomas Chong and Ken Chong in a preview last month of Tencent’s third quarter results.

In July, Shenzhen-based Tencent announced plans to expand into the gaming hardware business through a collaboration with US semiconductor giant Qualcomm.



Category: China

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