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Tencent beats estimates as WeChat, mobile games drive growth

May 18 2018 12:53
Lulu Yilun Chen, Bloomberg

Tencent posted first-quarter profit that blew past analysts' estimates, bolstered by mobile game blockbusters like PlayerUnknown's Battlegrounds.

Net income climbed 61% to 23.3 billion yuan ($3.7bn) in the three months ended March, the Shenzhen-based company said on Wednesday. That compares with the 17.4 billion-yuan average of estimates compiled by Bloomberg.

Adjusted earnings-per-share were 1.92 yuan, compared with the 1.94 yuan average of 14 analysts compiled by Bloomberg.

Tencent, owner of the giant WeChat messaging and social network platform, has been opening its wallet to sustain growth as desktop gaming slows.

The company is investing in cloud computing, online entertainment and physical retail stores as it locks horns with Alibaba. It’s also secured Chinese distribution rights to some of the world’s hottest games including PUBG and Fortnite, adapting some into mobile titles as more users spend time on smartphones.

"We expect Tencent to consolidate both the PC and mobile games markets," Alex Yao, a Hong Kong-based analyst at JPMorgan Chase & Co, said in a report.

"Tencent’s strength in [the] mobile games market also comes from its equity relationship with leading global developers."

Revenue rose 48% to 73.5 billion yuan, compared with analyst estimates for 70.8 billion yuan.

Shares of Tencent were largely unchanged in Hong Kong before earnings were announced. The stock has fallen 2.4% this year, compared with a 14% rise for New York-listed Alibaba.

* Fin24's parent company Media24 is part of the Naspers Group. Naspers owns a stake in Tencent.

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