Tencent's first-quarter revenue beats estimates on strong gaming, ad growth

Reuters News
Posted: May 18, 2016 5:25 AM

By Paul Carsten

BEIJING (Reuters) - Tencent Holdings Ltd <0700.HK>, China's biggest social network and online entertainment firm, on Wednesday said growth in its gaming and advertising businesses helped revenue rise 43 percent in the first quarter of 2016, beating analyst estimates.

The firm booked revenue for January-March of 32.0 billion yuan ($4.90 billion). That compared with the 30.66 billion yuan average of 10 analyst estimates compiled by Thomson Reuters.

Net profit rose at its quickest rate in over a year, by 34 percent to 9.27 billion yuan.

While online gaming has long been Tencent's main cash cow, expansion beyond games and advertising saw it invest 64 billion yuan last year. Many of its deals are a long way from yielding returns, with losses in associates and joint ventures rising eightfold in 2015.

Such losses in the first quarter of 2016 more than tripled from the same period a year earlier to 1.1 billion yuan. That was not enough to prevent Tencent's operating margin remaining at 42 percent.

Supporting the investment binge, online gaming revenue rose 28 percent in January-March to 17.09 billion yuan, bolstered by success in smartphone games, Tencent said.

Online advertising revenue also jumped, by 73 percent to 4.7 billion yuan.

Global monthly active users of Tencent's WeChat app reached 762 million at March-end, representing growth of 39 percent from a year earlier.

Tencent also flagged potential difficulty in the near future in its brand advertising business citing China's economic growth rate, which is languishing at 25-year lows.

(Reporting by Paul Carsten; Editing by Christopher Cushing)