Games and Advertising Lift Tencent to Record First Quarter Profit

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Tencent did appear to beat forecasts for net profit. The combined MAU of Weixin and WeChat amounted to 1.040 billion, up 10.9 percent year-on-year and from 989 million sequentially.

WeChat had 1.04 billion users as of March and WeChat Pay is more popular than Alibaba's Alipay in offline payment, though the latter is bigger in overall transaction volume.

While anxious investors had sold off more than $90 billion of stock since January, Tencent posted a 61 percent jump in net income to 23.3 billion yuan ($3.7 billion) in the March quarter, outstripping estimates by nearly a third.

Revenue rose 48 per cent to 73.53bn yuan, beating the 70.93bn yuan average estimate of 14 analysts, according to Thomson Reuters data. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months. Finally, a fourth game - QQ Speed Mobile - showed promising revenue after being taken from PC to mobile.

Tencent continues to draw the lion's share of its business from gaming, while counting on advertising and newer areas such as finance to drive future growth.

Tencent said on Wednesday that delays in earning revenues from games in China and heavy marketing expenses would hit mobile games revenue in the short term, a warning that played into CICC analyst Natalie Wu's call to maintain her target price for the stock at HK$540. Anchored by its marquee title, the smartphone games business yielded 68 percent growth in the quarter. PC client game revenues were broadly while social network revenues advanced 47 percent, pushed primarily by growth from digital content services such as live broadcast, video streaming subscriptions and music service WeSing, as well as from in-game virtual item sales. They surged to a record high in January and then again in March to become Asia's most valuable listed company, temporarily overtaking Facebook Inc.

This helps explain why it's remained one of the world's most loved stocks by analysts, with none recommending selling for more than two years. In the following months, however, the company's shares came under pressure with increasing costs driving investor fear of lower margins.