Tencent Third-Quarter Net Profit Rises Nearly 70%, Beating Estimates -- 2nd Update
November 15 2017 - 10:21AM
Dow Jones News
By Alyssa Abkowitz in Beijing and Chester Yung in Hong Kong
Chinese internet giant Tencent Holdings Ltd. continued its
winning streak, reporting earnings that rose nearly 70% from a year
earlier, driven by growth in mobile-gaming and advertising sales,
particularly on the company's video-streaming platform.
Shares of the Shenzhen, China-based company have more than
doubled since Jan. 1, raising its market capitalization to nearly
$466 billion. Tencent also made headlines last week when it bought
a 12% stake in U.S. social media company Snap Inc., becoming one of
its largest shareholders.
On a conference call with investors Wednesday, Tencent President
Martin Lau said the company saw an opportunity to acquire Snap
shares at "a pretty attractive price" and said Tencent may look to
do "something more strategic with them" in the future.
Profits handily beat Wall Street's expectations, reaching 18
billion yuan ($2.71 billion) from 10.6 billion yuan a year earlier.
Revenues climbed 61% to 65.2 billion yuan from 40.3 billion yuan.
The company reported after the close of trading in Hong Kong
Wednesday, where shares closed down 1.3%.
Heavy spending on video content is starting to pay off for
Tencent, which at the end of September was the No. 1
video-streaming service in paid subscriptions, according to data
firm App Annie. Tencent now has more than 43 million paying
subscribers, up from 20 million in November 2016.
The company also said revenues from video advertising grew 70%
from the year-earlier period, which helped contribute to overall
online advertising revenue increasing 48% from the year-ago
period.
"While the video sector as a whole is still making losses, we
will continue to invest in the long run," Mr. Lau said, adding that
video is an important component of the firm's cross-media
strategy.
Video-streaming is a hotly contested area for Tencent and its
other tech rivals, Alibaba Group Holding Ltd. and Baidu Inc.
Tencent and Baidu, particularly, have been going back and forth to
woo paid subscribers with a mix of exclusive and licensed content.
Mr. Lau said Tencent had made headway in expanding its young female
user base in drama, the most popular genre, and in scheduling
programming to optimize viewership.
The bulk of Tencent's revenues continued to come from games.
Smartphone gaming revenues rose 84% from a year earlier, anchored
by smash hit battle game "Honor of Kings."
The company's messaging, mobile-payment and social-media
platform, WeChat, which is the most popular app in China, reached
980 million users at the end up September, up 16% from a year
earlier.
Its other businesses, including mobile payments and cloud
services, recorded revenue growth of 143% from the year-ago period.
The company said payment volume from mobile payments in
brick-and-mortar stores rose 280%.
Mr. Lau said overseas growth of WeChat Pay will be serving
Chinese tourists, and that globally, the company is pursuing a
"partnership strategy" with local players instead of competing with
them.
On the heels of Tencent's successful spinoff of its online
publishing business, China Literature Ltd., Tencent executives
noted that as investee companies reach maturity, the company will
look to make them go public but that homegrown businesses make more
sense to "stay together so they can reinforce each other."
Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com and Chester
Yung at chester.yung@wsj.com
(END) Dow Jones Newswires
November 15, 2017 10:06 ET (15:06 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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