Tencent, the highest valued Chinese tech company, smashed analyst expectations Wednesday with the release of its first quarter earnings.
An Incredible First Quarter
According to the company’s financial report, for the first quarter of 2018 Tencent saw a staggering $3.7 billion profit from $11.5 billion in revenue. This margin marks a 61% increase over the previous year’s profit from the same time period, and a 48% increase in revenue year-on-year. This comes as welcome news for investors who had been nervous about potentially lowered margins stemming from increasing company costs.
Profits Attributed to Mobile Gaming
The unexpected financial performance was largely due to the company’s mobile gaming business. Compared to the same period last year, Tencent’s smartphone gaming revenue was up a whopping 68% year-on-year. This surge in revenue was due in large part to the success of such mobile titles as the hugely popular ‘Honour of Kings’, and the incredibly successful, ‘Fortnite’. According to Tencent, much of this revenue was generated by purchases users made while playing the games.
Ad Revenues Rise Through WeChat
Tencent distributes the games through its wildly popular messaging and social media app, WeChat. Earlier this year, WeChat crossed a milestone when it eclipsed 1 billion monthly users for the first time ever. The enormous popularity of the app accounts for the tremendous 55% increase in advertising revenues seen in this first quarter of 2018 as well. This increase in ad revenue was due in part to the fact that the messaging giant recently began to raise the amount of daily ads seen by users from one ad, to two.
Tencent Keeps Rising
Since its founding in Shenzhen, China, in 1998, Tencent has made one shrewd investment after another. With numerous acquisitions and exits under its belt, Tencent has been on a relentless missions to provide its users with what it calls, ‘one-stop online lifestyle services’. Along with gaming and messaging, Tencent also offers telecom services, communications, information, search engines, entertainment, and e-commerce offerings just to name a few. In November of 2017, Tencent reportedly became the first Chinese tech firm to be valued at over $500 billon.
Calming Investor Concerns
Despite the current success, investors were nervous leading into Wednesday announcement. With a rise in spending, and a perceived slowing of company growth, many analysts anticipated lower than normal first quarter profits. Couple this with the fact that the company saw more than $51 billion in stock value wiped out in less than a 48 hour period in March, and it is easy to see why interested parties were more than a little concerned. All this was largely allayed Wednesday however with the release of the latest earnings report. How long those concerned will remain assuaged however, is yet to be seen.