Tencent Profits Surge 89% Year-on-year, Pledges Cooperation with Antitrust Regulators

Chinese social and gaming giant Tencent reported strong Q3 financial results on Thursday, generating a revenue of 125.5 billion yuan ($18.9 billion), up 29% year-on-year and ahead of analysts’ expectations. 

The Shenzhen-based company posted a massive 89% growth in net profit year-on-year to 38.54 billion yuan ($5.8 billion) in the fiscal third quarter, according to its financial report.

Gaming, which accounts for the bulk of Tencent’s overall income and is lumped under its value-added service (VAS) segment, reported a revenue increase of 45% year-on-year to 41.42 billion yuan ($6.2 billion), benefiting from robust growth of existing titles as well as recognition of deferred revenue from the stay-at-home period. 

Popular domestic titles include Peacekeeper Elite (China’s version of PUBG Mobile) and Honor of Kings, with the latter recording more than 100 million average daily active accounts in the first 10 months of this year, the report said. 

In recognition of the game’s success since its launch five years ago, the company said it plans to launch two new games, an animated series and a live action drama series in the Honor of Kings universe.

Also categorized under the VAS segment are video subscriptions and music subscriptions, with the former growing 20% to 120 million subs, while the latter grew 46% year-on-year to 52 million subs.

The company’s messaging app WeChat, which underwent multiple version updates this year, reached 1.21 billion monthly active users, a year-on-year increase of 5.4%.

Its fintech and corporate services unit posted moderate growth, with revenue increasing by 24% year-on-year to 33.25 billion yuan in the third quarter due to higher revenues from commercial payment and wealth management.

Online advertising revenues grew 16% to 21.35 billion yuan ($3.2 billion) on a year-on-year basis. Management said China’s advertising activity appears to have largely returned to normal overall post-COVID, but noted a few industry exceptions such as the travel industry as well as substantial changes in advertiser behaviour. 

Meanwhile, the company attributed the slow growth rate of Tencent Cloud and other corporate services to the lingering impact of the pandemic, which caused delays in project delivery and new contract signing.

Ma Huateng, Chairman and CEO of Tencent, said in a press release that the third quarter of 2020 marked the second anniversary of the company’s strategic organization upgrade, intended to enhance its strength in Consumer Internet and extend its presence to Industrial Internet.

“While the upgrade was designed to bear fruit over the long run, we are already seeing initial benefits in areas such as consolidating our advertising services, rejuvenating our product and content platforms, growing our cloud and SaaS businesses and building an internal open source code base,” he said.

Tencent’s better-than-expected results came as the company recovered from an announcement from Chinese antitrust regulators to curb the dominance of the country’s tech giants.

The guidelines unveiled by the State Administration for Market Regulation sent shares tumbling in Hong Kong on Tuesday. Meituan’s shares fell more than 11% following the news, while Alibaba’s and Tencent’s fell 5% and 4% respectively. JD.com was also down more than 8%.

Just a few days ago, Beijing abruptly halted Ant Group’s highly anticipated $37 billion IPO, a sign of the authorities’ heightened oversight over the fintech industry.

In response to the new anti-monopoly draft rules during their earnings call, Tencent President Martin Lau Chi-ping pointed out that the regulations emphasized fair competition and promoted innovation, citing a “a balance of interest for all stakeholders” as the spirit of the paper. 

He also added that the regulation is not new nor unique to China, and that it aligns with Tencent’s business strategy and philosophy. 

“As technology companies become bigger and more important to the economy … more regulations to reflect the new reality are needed,” he said, adding that the company has pledged cooperation with the regulatory authority. 

“We believe the government is still supportive of the Internet and the technology industry, especially the innovation that’s driven by the industry. But the intention is to prevent misconduct and also ensure long-term healthy growth for the industries,” he said.

Meanwhile, the company attributed the slow growth rate of Tencent Cloud and other corporate services to the lingering impact of the pandemic, which caused delays in project delivery and new contract signing.

SEE ALSO: Tencent-backed Esport Star Honor of Kings DAU Reaches 100 million

Ma Huateng, Chairman and CEO of Tencent, said in a press release that the third quarter of 2020 marked the second anniversary of the company’s strategic organization upgrade, intended to enhance its strength in Consumer Internet and extend its presence to Industrial Internet.

“While the upgrade was designed to bear fruit over the long run, we are already seeing initial benefits in areas such as consolidating our advertising services, rejuvenating our product and content platforms, growing our cloud and SaaS businesses and building an internal open source code base,” he said.

Tencent’s better-than-expected results came as the company recovered from an announcement from Chinese antitrust regulators to curb the dominance of the country’s tech giants.

The guidelines unveiled by the State Administration for Market Regulation sent shares tumbling in Hong Kong on Tuesday. Meituan’s shares fell more than 11% following the news, while Alibaba’s and Tencent’s fell 5% and 4% respectively. JD.comwas also down more than 8%.

Just a few days ago, Beijing abruptly halted Ant Group’s highly anticipated $37 billion IPO, a sign of the authorities’ heightened oversight over the fintech industry.

In response to the new anti-monopoly draft rules during their earnings call, Tencent President Martin Lau Chi-ping pointed out that the regulations emphasized fair competition and promoted innovation, citing a “a balance of interest for all stakeholders” as the spirit of the paper. 

He also added that the regulation is not new nor unique to China, and that it aligns with Tencent’s business strategy and philosophy. 

“As technology companies become bigger and more important to the economy … more regulations to reflect the new reality are needed,” he said, adding that the company has pledged cooperation with the regulatory authority. 

“We believe the government is still supportive of the Internet and the technology industry, especially the innovation that’s driven by the industry. But the intention is to prevent misconduct and also ensure long-term healthy growth for the industries,” he said.

E-commerce platform Pinduoduo, in which Tencent has a stake of 16.5%, also reported a surge in revenue on Thursday. The Shanghai-based company posted a 89% year-on-year revenue growth to 14.2 billion yuan ($2.1 billion).