Driven by revenue growth from popular games and growth in online advertising sales, Tencent’s second-quarter profit increased by 29%, exceeding expectations.
The net profit for the three months ended June was 42.6 billion yuan (approximately Rs 48,830 crore), which was higher than Refinitiv’s consensus estimate of 34.4 billion yuan (approximately Rs 39,430 crore). The increase in fair value assessment of some companies invested by Tencent also boosted profits.
Revenue increased by 20% to RMB 138.3 billion (approximately Rs 158.5 billion), and mobile game sales increased by 13%.
Tencent has experienced a series of setbacks due to the regulatory actions taken by the Chinese authorities on the technology industry and other industries.
Tencent has been banned from signing an exclusive music copyright agreement, and last month the Chinese market regulator blocked its US$5.3 billion (approximately Rs 393.6 billion) plan to merge Douyu and Huya.
After an article in the state media described online games as “mental opium” and expressed concerns about its impact on children, the shares of the world’s largest gaming company by revenue have also been hit hard.
As a result, earlier this week, Tencent temporarily lost its crown as Asia’s most valuable company and was defeated by chip manufacturer TSMC. Its stock price has fallen by about 8% since its August 3 article.
Since then, Tencent has announced new measures to reduce the time and money that children spend on games, starting with its most popular game “Glory of the King”. It said in its earnings report on Wednesday that these measures “exceed regulatory requirements.”
It also emphasizes that it is increasingly providing its technology and expertise to companies and public services in an effort to contribute to the economy and society.
Some analysts said the market had overreacted to the official media’s criticism of the gaming industry, and pointed out that government calls to protect minors were not new, and that such players accounted for only a small portion of online gaming revenue.
Tencent stated that players under the age of 16 accounted for only 2.6% of its total gaming revenue in China in the second quarter.
© Thomson Reuters 2021