By Sherry Qin
Tencent Holdings sustained its earnings growth momentum in the third quarter, with the core gaming business delivering strong results, a sign of the Chinese technology giant's resilience in the face of a cooling economy.
The videogame and social-media company said Wednesday that net profit jumped 47% to 53.23 billion yuan, equivalent to $7.36 billion, and revenue increased 8% to 167.19 billion yuan. While the quarterly revenue was roughly in line with analysts' estimates, its bottom line comfortably beat the consensus.
The upbeat results came despite a slowdown in the world's second-largest economy hurting consumer confidence, suggesting that Tencent's high-quality growth strategy, with businesses spanning games, social network, digital payment and cloud, is working. The Shenzhen-based company, China's largest by market capitalization, has been prioritizing growth drivers and high-margin businesses, such as games and its TikTok-style video accounts embedded in WeChat.
Tencent's online-gaming revenue growth accelerated to 13%, with its domestic game division delivering a 14% sales gain after returning to growth in the second quarter. Both the strong performance of evergreen titles such as "Honor of Kings" and "Peacekeeper Elite" during summer promotions and the first full-quarter contribution from the blockbuster title "Dungeon & Fighter Mobile" buoyed its sales.
Games will likely continue to be a cash cow for the company in the next few quarters. Tencent has a rich pipeline of 78 mobile games entering the market next year, 46 of which have already been approved by China's videogame regulator, according to Citi.
Meanwhile, growth in its advertising and fintech segments continued decelerating. Its online advertising sales rose 17%, down from a 19% increase in the second quarter, while fintech segment sales rose just 2% from a year earlier.
In September, rival Chinese e-commerce giant Alibaba Group integrated Tencent's WeChat Pay into its domestic shopping sites Taobao and Tmall, a milestone toward breaking down the walls dividing Chinese internet giants. Some analysts have said the move could benefit Tencent's commercial payment.
Shares in Tencent have lost steam in recent weeks after rallying along with the broader market in late September on hopes that China will roll out a large fiscal stimulus package to revive the economy. The stock remains nearly 40% higher this year, compared with the benchmark Hang Seng Index's 16% gain.
Tencent is the first major Chinese tech company to report earnings for the most recent quarter. Peers Alibaba and JD.com are scheduled to release quarterly results later this week.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
November 13, 2024 05:13 ET (10:13 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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