Tencent Sees Profit Increase of 61% Thanks to Games Business

Tencent Sees Profit Increase of 61% Thanks to Games Business

Tencent profit jumps 61% to $3.7B as its mobile gaming business surges

However, those feats were dispelled by the technology giant. But the cost of revenue in that category doubled to 11.91 billion yuan, due to subsidies and promotional expenses. That compares to the 17.4bn-yuan average of estimates compiled by Bloomberg. PC games remained flat with 14.1 billion yuan in revenue compared to same period a year ago.

With strong cashflows and a huge customer base in excess of one billion users, Tencent has been aggressively seeking out start-ups with good potential and boosting their chance of success by providing funding support as well as customer traffic.

Shares of Tencent Holdings opened up 7 per cent in Hong Kong on Thursday after it reported better-than-expected first-quarter results. The increase there was mainly driven by growth at smartphone games, including existing titles such as Honour of Kings and newly launched titles MU Awakening and QQ Speed Mobile.

Tencent said mobile game revenue hit 21.7 billion RMB ($3.4 billion) during the quarter, up 68 year-on-year.

There's an argument to be made for stripping out extraneous items because Tencent runs the games and social side of the business itself, but doesn't have direct control over investees.

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However, Tencent expects its PC game business to benefit from the roll-out of the PC versions of popular battle royale titles Fortnite and PlayerUnknown's Battlegrounds.

Tencent continues to draw the lion's share of its business from gaming, while counting on advertising and finance via WeChat to drive future growth.

Fortnite was developed by Epic Games, a company that saw Tencent acquire a 48.4 percent stake for US$330 million.

China's largest social network and gaming company defied fears that outsized spending would hammer profitability. Earlier this month it led a US$820 million round of funding in Shenzhen-based UBTECH Robotics, making it the world's most valuable AI start-up with an estimated valuation of US$5 billion. It is available as well on mobile. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months.

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