Mubasher: China’s Tencent on Wednesday reported a 61% year-on-year surge in its profits for the first quarter ended March 2018, beating market expectations, backed by its hugely successful gaming business.
The Hong Kong-based company’s net profits amounted to RMB 23.29 billion ($3.7 billion) in Q1-18, compared to RMB 14.47 billion in Q1-17.
Analysts polled by Thomas Reuters had expected Tencent's first-quarter earnings to reach RMB 17.5 billion.
The technology giant generated a revenue of RMB 73.53 billion ($11.5 billion) in the first quarter of 2018 versus RMB 49.55 billion in the same quarter last year. Analysts had projected the firm's revenue to hit RMB 71.04 billion.
The gaming business boosted Tencent’s quarterly revenues as the Chinese company received $21.7 billion revenue from the smartphone games alone with a 68% year-on-year increase.
Meanwhile, revenues from online game business were driven by the two hit games, namely PlayerUnknown's Battlegrounds and Fortnite.
However, the multiplayer online game PlayerUnknown's Battlegrounds "will negatively impact our financials in the short term because we have not yet monetised the games in the China market,” the Chinese giant’s president Martin Lau Chi-ping said.
He added that the game would generate “substantial revenue” once the company begins monetisation.
In addition, Tencent's online advertising revenues rose 55% in the first three months of the year, compared to the prior-year period, while total revenues from video business saw a 75% year-on-year surge.
Operating margin also increased 42% to RMB 30.69 billion in January - March from a 39% increase to RMB 19.27 billion during the same period last year.
Tencent managed to raise its operating margin by 8% in the first quarter of 2018, compared to the fourth quarter of 2017, despite the capital expenditure increased 200% to RMB 6.3 billion during the quarter.
“We continued investing actively in our strategic priority areas … to fulfil our mission of enhancing quality of life via internet services,” Tencent’s CEO Pony Ma Huateng said.