Chinese tech giant Tencent beats expectations on quarterly profit, but gets hurt by slowed revenue growth

Tencent has trounced consensus estimates on profits in its third quarter, as gains from its investments helped to offset weaker results in its core gaming business hit by legal woes.

Its share price was down 0.8 per cent as markets closed in Hong Kong this morning.

The figures

Net profit in the three months to September rose 30 per cent to 23.3bn yuan (£2.6bn), at an increase of 30 per cent year-on-year. This beat consensus estimates of 18.5bn yuan, as collated by S&P Global Market Intelligence.

However revenue rose 24 per cent to 80.6bn yuan, which was its slowest quarterly growth in more than three years. This missed estimates slightly, which had anticipated revenue of 80.7bn yuan.

Specifically, revenue from its online games division decreased by 4 per cent year-on-year to 25.8bn yuan, attributed to a decline in revenue from its PC client games.

Its online advertising business, where Tencent hopes to increasingly take a slice of the global market away from dominant players such as Google, rose 47 per cent to 16.2bn yuan.

Why it's interesting

The Chinese government stopped approving monetisation licences for new games in March as it undergoes a redevelopment of its regulatory environment, which has hit Tencent hard.

The tech giant reported its first profit decline in over a decade in August, as it failed to monetise popular smartphone and online games such as Fortnite and PlayerUnknown's Battlegrounds.

What the company said

Tencent chairman and chief executive Ma Huateng said:

"During the third quarter of 2018, we registered strong operating results in our businesses and maintained healthy financial metrics."

"Our advertising, digital content, payment and cloud services sustained robust activity and revenue growth, and now account for the majority of our revenue."

"At the end of the quarter, we upgraded our organisation to help enterprises and various industries to benefit from the new trend of industrial internet through digitisation and technology innovation, and to provide consumers with better integrated entertainment and social experiences, as well as to unify our advertising sales platforms. We believe this strategic organisational upgrade will position us well for future long-term growth."