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Tencent advances revenues 48%, profit over 60% in Q1

Tencent advances revenues 48%, profit over 60% in Q1

China's largest social media and gaming company posted a faster than expected 61 per cent jump in net income last quarter as growth on mobile bounced back, outstripping estimates by nearly a third. Profit was up 61% over the same period one year ago.

As reported, operating margin climbed to 42 percent for the three months through March, from 39 percent a year earlier. Another title - Honour of Kings - was the world's highest-grossing mobile game previous year thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

In a battle for the world's largest mobile payment and retail market, Tencent has splashed out billions forging alliances with new partners like Carrefour and subsidising merchants to lure them onto its payment-to-messenger super app WeChat.

Tencent has historically done well in the games space with the PC its cash cow, but previous year its smartphone games business overtook that of PC based on revenue. The company announced that had seen growth in the double digits related to the number of daily active users for that game. This upturn was largely driven by revenue from online games, advertisements and social networks.

Revenue from PC games was flat compared to past year, but analysts believe the comparison was tough with the 2017 first quarter, and overall its games business was strong. Last month, Tencent partnered with United States developer Epic Games to launch Fortnite in China.




But overall costs surged 51 per cent. Tencent executives have signaled a willingness to sacrifice margins in favor of longer term growth in new businesses, though that would depend on growing and engaging a massive user base now primarily confined to China. Developed by Tencent's own studio, the mobile title resembles the world's most popular desktop title League of Legends, whose developer was acquired by Tencent in 2015. Now unavailable in China, it will be launched in the country within the next few months.

The game has gone viral and has over 40 million monthly active users across PC and consoles.

Between its January peak price of HK$476.6 and a low this year of HK$380 on May 8, Tencent lost US$117 billion in market value.

The gross profit margin in the quarter was more than 50 per cent, higher than the 47 per cent expected by analysts.

Tencent's other earnings drivers included its video subscription service, which is similar to Netflix.