On Wednesday, Tencent, Chinese internet giant said, net profit soared nearly 17 percent in the first quarter as the company appeared set to emerge from the battering it received from Beijing’s crackdown on gaming.
In the three months ending March 31, Shenzhen-based Tencent said net profit came in at 27.2 billion yuan ($4 billion) over passing the Bloomberg average analyst estimate of 19.4 billion yuan. At 85.5 billion yuan, revenues were up 16 percent primarily driven by commercial payment services and other FinTech, and digital content businesses.
Last year, Chinese government crackdown on gaming launched and Tencent was hammered by this act. It had choked off game approvals as authorities took aim at titles they felt were inappropriate, overly violent or addictive.
Earlier this month, Tencent was stopped by Chinese regulators from monetizing the hugely popular battle-royale style mobile game “Player Unknown’s Battlegrounds” on the mainland with the tech giant eventually dropping the title.
By the last year, $250 billion were shaved off during this crackdown off the company’s stock market value and battered profits towards the end of 2018. Some game approvals subsequently resumed thus shares have largely recovered. The company said:
Mobile game revenues fell two percent year-on-year in the first quarter to 21.2 billion yuan “due to fewer new games releases”
The results showed the company’s hugely profitable gaming sector was bouncing back, according to the analysts.
An analyst at Bloomberg Intelligence cited by Bloomberg News, Vey sern Ling said:
“Missing consensus top-line estimates is not ideal, but the bright spot is growth came where it mattered — in games, which is their most profitable segment,”“The 11 percent sequential jump in mobile game sales bodes well for the sustained recovery of the business over 2019, especially with the addition of new games.”
Ahead of the report, shares in the Hong Kong-listed company rose 0.92 percent on Wednesday. A new game called “Game for Peace” that looks remarkably similar to “Battlegrounds” was released by Tencent. It was developed in conjunction with China’s air force and cleared regulators.
According to Sensor Tower which monitors mobile gaming data revenue, the game took in $14 million within 72 hours.
Major tech giants such as Tencent and Alibaba are increasingly looking overseas for growth with China’s economy slowing down, often competing with each other in key areas like cloud computing and Fintech. On Thursday, Tencent said
Its cloud business “sustained a rapid year-on-year revenue growth rate” thanks to an expanding paying customer base.
Later on Wednesday, Alibaba is expected to release its results of profit.