Tencent Q3 revenue up 34%, above estimates
In opening remarks, CEO Daniel Zhang said the “world will witness the power of Chinese consumption”.
Tencent is one of China’s largest Internet and commerce businesses, but it does have strong competition from others that have established a foothold in both of these sectors.
BEIJINGTencent Holdings Ltd, China’s biggest social network and online entertainment firm, saw third quarter revenue rise 34 percent, beating analyst estimates, its fastest growth rate in five quarters, partly from a surge in online advertising income.
Tencent runs WeChat and QQ, two of China’s most popular platforms for messaging and social networking.
The solid performance is likely to have made Tencent more confident about the prospects of e-commerce partner JD.com, in which it has a 15 per cent stake, as it battles Alibaba in Wednesday’s much-anticipated Singles Day online-shopping event.
Sales rose 34 percent to 26.6 billion yuan, compared with analysts’ estimates for 25.4 billion yuan.
“Aggressive investments in mobile penetration led to a modest bottom-line miss, but we believe the investments are warranted, considering the increasingly competitive mobile space in China”, said Henry Guo, a Summit research analyst, in a research note. “It has significant monetisation potential from mobile advertising and mobile gaming”.
Advertising is also an area where Tencent is seeing revenue jump on mobile.
WeChat’s population of active users grew to 649.5 million in September from 600 million in July, Tencent said, while active users of QQ’s mobile app increased to 639.1 million from 627 million.
Tencent is expected to earn billions from its smartphone games for WeChat and QQ users, as well as the free streaming of HBO’s “Game of Thrones” and National Basketball Association Games.
Tencent said revenue from smartphone games was 5.3 billion yuan, up 60% from a year earlier-a sharp acceleration from the second quarter’s 11% pace.
Tencent pulled in a net profit of 7.584 billion RMB ($1.2 billion) on revenue of 26.594 billion RMB ($4.2 billion), and messaging is a huge part of that.
Tencent is up 35% this year. Alibaba is down 22% but holds a high 92 IBD Composite Rating. Earnings per share for the quarter were RMB0.792, up from RMB 0.605 in the same quarter past year.