Tencent shrugs off gaming troubles with 30% increase in profit

Posted at 5:55 AM, Nov 14, 2018
and last updated 2018-11-14 07:55:50-05

Tencent is getting its business back on track.

The Chinese gaming and social media giant reported net profit of more than 23 billion yuan ($3.4 billion) for the three months ended in September, up 30% and higher than analyst forecasts.

Revenue climbed 24% to 80.6 billion yuan ($11.6 billion).

The numbers are a big improvement over last quarter’s results, when the gaming and social media giant reported a profit drop for the first time in more than a decade.

Tencent’s (TCEHY) stock has slumped since Beijing regulators began stepping up scrutiny of the online gaming industry earlier this year. The company said Friday that revenue from smartphone games rose by 7% compared to the same quarter last year, attributing the jump to 10 new releases in the three months to September.

Tencent said its strong performance was also driven by rapid growth in revenues from digital content, advertising, cloud computing and online payments. WeChat, the company’s hugely popular messaging platform, saw a 10.5% increase in monthly active users, which now total 1.08 billion.

More games in the pipeline

Authorities stopped approving licenses for new mobile games in August, preventing Tencent and other companies from making money on new titles. The company said in its earnings report Wednesday that it has 15 games in the pipeline that already have regulatory approval.

China’s Education Ministry has announced that it will control the number of new online games and explore an age-appropriate reminder system to limit how many hours minors could play games. The new measures, the ministry said, are an effort to reduce nearsightedness in kids.

In response, Tencent said it would begin checking the identities of gamers against police databases. Users under 12 will be limited to one hour of gaming per day, and those aged between 12 and 18 to two hours.

The increasingly restrictive environment, along with concerns about a slowing Chinese economy and a broader sell-off in tech stocks, have hit Tencent shares hard this year.

The stock is down more than 40% since a high in January, wiping nearly $250 billion off Tencent’s market value. The shares closed at 272 Hong Kong dollars on Wednesday before the earnings were released.