Tencent reported Wednesday better-than-expected revenue for the first quarter thanks to a surge in gaming incomes.
Why it matters:ย The Covid-19 outbreak gave a boost to the companyโs gaming revenue as people turned to online entertainment while stuck at home.
By the numbers: The company booked RMB 108 billion (around $15.2 billion) in total revenue in the quarter ended March 31, an increase of 26% compared with the same period of time last year, the company said Wednesday.
- Revenue from Tencentโs gaming business rose 31% to RMB 37.3 billion in the quarter, which the company attributed to a surge of daily active users (DAUs) of its flagship games PlayerUnknownโs Battlegrounds Mobile (branded as Peace Elite in China) and Honor of Kings during Chinaโs stay-at-home period in February and March.
- The companyโs ad revenue grew 32% year on year in the March quarter to reach RMB 17.7 billion despite a broader slowdown in Chinaโs ad market.
- The company said its revenue from media ads fell 10% from a year ago due to โweak macro-economic conditions and suspension of sports events.โ
- Tencentโs fintech and business services segment, which includes products such as Wechat Pay, consumer loan services, and cloud computing, grew to RMB 26.5 billion in the quarter, up 22% from the same quarter a year ago, but decreased 12% from the previous quarter.
- Monthly active users of Wechat, Tencentโs popular instant messaging app, reach 1.2 billion as of the end of March, up 8.2% from a year ago.
Headwinds:ย However, Tencent has also warned the upsurge could be temporary.
โWe expect in-game consumption activities to largely normalize as people return to work, and we see some headwinds for the online advertising industry.โ
Context: Shares of Hong Kong-listed Tencent have climbed by 14.4% since the beginning of this year, compared to a 15% decline in the Hong Kong exchangeโs Hang Seng index.
- The company is also facing fierce competition from rising star Bytedance. The TikTok-ownerย is continuing to take ad revenue share from Tencent and has recently made a foray into Tencent’s home turf, the mobile gaming market.
