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Bloomberg
Tencent Holdings Ltd. posted earnings that surpassed all analyst estimates as one-time gains and advertising demand limited the impact of a government clampdown on its lucrative games business.
Net income surged 30 percent to 23.3 billion yuan ($3.4 billion) for the September quarter, compared with the 18.4 billion yuan average of estimates.
With revenue growing at the slowest pace in three years, the result was boosted by one-time gains of more than 8.7 billion yuan, including its investment in Meituan Dianping.
Tencent’s earnings bucked a recent trend of disappointing results from China’s technology companies as a slowdown in the economy dampens the outlook. Alibaba Group Holding Ltd. cut its outlook for annual revenue, while search leader Baidu Inc. also predicted sales below estimates. Tencent has been hammered by concerns about games that have wiped out more than $240 billion of market value since a January peak.
The government has effectively frozen new licenses for games, which means Tencent’s been unable to make money off its newest and biggest titles — including global hits Fortnite and PlayerUnknown’s Battlegrounds. While China is trying to combat gaming addiction and is reshuffling regulators, uncertainty persists for gaming companies. Tencent is said to be responding with belt-tightening as it cuts marketing budgets to help tide it over the drought. Online advertising jumped 47 percent in the third quarter while the Value Added Services business, which includes games, grew just 5 percent.
Revenue from smartphone games climbed just 7 percent.