Tencent clobbers estimates with 70% profit surge

Net profit surged to 18.2 billion yuan ($2.7 billion) in the three months ending in June, up 70 percent year-on-year, the Shenzhen-based company said.

That easily beat an average estimate of 13.5 billion yuan in an analysts poll by Bloomberg News.

Total revenues reached 56.6 billion yuan, up 59 percent and topping projections of 52.9 billion yuan in the Bloomberg poll.

The company has signalled plans to extend a gaming empire built around its social media platform WeChat, which is ubiquitous in China, by buying studios and pushing into content creation.

Online game revenues increased 39 percent, while revenue from social networks revenues expanded 51 percent, “mainly reflecting growth in revenues from digital content services such as live broadcast, video and music,” Hong Kong-listed Tencent said in a statement.

It also reported strong growth in advertising, an area where analysts had said the company was falling short. Tencent is trying to reduce its reliance on games in favour of more advertising revenue.

“Tencent’s existing games and pipeline continue to draw new gamers and revenue,” Morgan Stanley analysts wrote in a report ahead of the results release, according to Bloomberg.

The report also noted “strong growth potential in performance advertising and surging revenue growth in the payments business.”

Tencent shares have rocketed 70 percent this year on expectations of continued success in its core games business, which includes the wildly popular “Honour of Kings” and other hits, and on hopes that it will realise the advertising potential of the widely used WeChat.

It said monthly active users of WeChat reached 963 million for the quarter, up 19.5 percent year-on-year.

Its shares rose 1.38 percent to HK$323.20 in Hong Kong on Wednesday ahead of the results announcement.