Tencent Rides Soaring Online Gaming Revenue to Post Rise in Q1 Profit

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Chinese gaming and social media giant Tencent reported a forecast-beating 65 percent rise in quarterly profit on Thursday, while management reiterated the company’s focus on compliance as China steps up scrutiny on tech giants.

Tencent, the world’s largest gaming firm by revenue, booked profit of CNY 47.77 billion (roughly Rs. 54,180 crores) for the three months through March, higher than the average analyst estimates published by Refinitiv of CNY 35.45 billion (roughly Rs. 40,220 crores).

The results come as Chinese regulators have stepped up an anti-trust clampdown on internet giants, and have already penalised Tencent rival Alibaba $2.75 billion (roughly Rs. 3,120 crores). Reuters reported last month that Tencent was told by Chinese anti-trust regulators to pay a fine that could exceed CNY 10 billion (roughly Rs. 11,340 crores), give up exclusive music rights, and sell some of its music assets.

Tencent, along with Alibaba affiliate Ant Group, is also facing regulator scrutiny of its non-bank payment business.

Addressing a question on general regulatory compliance, Tencent president Martin Lau said the company is very focused on compliance and risk management, and very self-restrained in terms of the size of non-payment financial products. “When we look into internal review, and when we look… to make sure that we are compliant with the spirit of regulators, it’s actually relatively manageable,” said Lau. Tencent is also facing mounting competition from ByteDance, the owner of TikTok, and the similar short-video platform Douyin, which have made sizeable inroads into the video games business.

Tencent also said on Thursday the company is investing in business services, games, and short-form video content. Tencent, which gets 32 percent of its revenue from video games, unveiled more than 60 new titles at its annual video gaming conference last week. It is looking to launch a mobile version of its League of Legends game, and also a Pokemon game in partnership with Nintendo later this year.

Revenue rose 25 percent to CNY 135.3 billion (roughly Rs. 1,53,460 crores), versus market expectations of CNY 134.39 billion (roughly Rs. 1,52,440 crores).

Tencent said revenue from online games grew by 17 percent.

© Thomson Reuters 2021

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