Tencent Q3 results: Gaming resilience and ad uptick see profits boom

By Robert Scammell

Chinese internet giant Tencent has beat analyst expectations in its third-quarter results, nearly doubling its profits as it continues to enjoy strong demand for its online video games.

The company behind messaging app WeChat and the League of Legends gaming studio reported overall revenues RMB125.4bn (US $18.4bn), a 29% year-over-year increase.

Profits for the quarter ended 30 September were up 85% year on year to $5.71bn, with a net profit margin increasing to 27% from 26%.

It reported Q3 diluted earnings per share of $0.60.

Value add service (VAS) digital content offerings, which includes gaming, video and music, increased 25% year on year, with revenue coming in at $10.5bn.

Tencent’s Q3 results cover a quarter in which Chinese consumers came out of lockdown, which should have meant less time spent online.

However, Tencent’s gaming segment did not appear to take a hit from this, although this can in part be attributed to a tailwind of deferred gaming sales from the previous quarter.

The company owns a 40% stake in Epic Games, the maker of Fortnite, and has investments in other popular games such as Players Unknown Battleground.

The company said the latest instalment of League of Legends helped drive mobile gaming revenue growth.

Tencent Q3 results: Cloud computing slumps

Elsewhere Tencent’s fintech and business segment saw revenues increase 24% year over year to $5bn.

Tencent said that advertising in China had largely returned to normal following a drawback of ad spend by companies during the height of the pandemic.

The Shenzhen-headquartered conglomerate saw a 16% increase in ad spend across its platforms, driven by sectors such as education and ecommerce.

However, the firm’s cloud computing segment was “affected by the lingering impact from pandemic”, resulting in a lower than expected year-on-year revenue growth rate.

“This quarter marked the second anniversary of our strategic organisation upgrade, which was intended to enhance our strength in consumer internet and extend our presence to industrial internet,” said Ma Huateng, Tencent chairman and chief executive.

“While the upgrade was designed to bear fruit over the longer run, we are already seeing initial benefits in areas such as consolidating our advertising services, rejuvenating our product and content platforms, growing our cloud and SaaS businesses and building an internal open source code base.”

WeChat growth continues

The combined monthly active users of all-in-one messaging apps WeChat and Chinese counterpart Weixin stood at 1.15 billion in Q3, up 5.4% year over year.

In August, WeChat found itself the target of an executive order from the Trump administration, which sought to ban the messaging app on national security grounds. Critics described the move as part of a trade war and a judge subsequently blocked a move to ban it on the grounds that it raised “serious questions” about free speech.


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