Honor of Kings developer Tencent Rides Gaming, advertising increase to beat quarterly estimates

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Tencent beat forecasts with profits jump 29 percent in the second quarter, aided by an increase in revenue from popular games and growth in online advertising revenue.

The robust demand for games like Honor of Kings and PUBG Mobile offset a decline in sales from the battle royale title Peacekeeper Elite.

Net income for the three months ended June was CNY 42.6 billion (approximately Rs.48,830 billion), above Refinitiv’s consensus estimate of CNY 34.4 billion (approximately Rs.39,430 billion). Profits were also increased by increasing the fair value ratings of some of the companies Tencent has invested in.

Sales rose 20 percent to CNY 138.3 billion (approximately Rs.1.58.5 billion), with mobile game sales increasing 13 percent.

The results follow a series of setbacks Tencent has experienced as a result of regulatory measures taken by Chinese authorities against the tech industry and other sectors.

Tencent was prevented from entering into exclusive music rights agreements and saw its $ 5.3 billion (approximately Rs.39.360 billion) plan to merge DouYu and Huya blocked by the Chinese market regulator last month.

The world’s largest gambling company by revenue also took a hit after a state-run media article called online games “spiritual opium” and raised concerns about their impact on children.

As a result, Tencent temporarily lost its crown as Asia’s Most Valuable Company to chipmaker TSMC earlier this week, and its shares have fallen about 8 percent since the August 3 article.

Tencent has since announced new measures to reduce the time and money kids spend on games, starting with its most popular game, Honor of Kings. In Wednesday’s earnings statement it was said that the steps “went beyond the regulatory requirements”.

She also emphasized that she is increasingly offering her technologies and know-how to companies and public services in order to make a contribution to the economy and society.

Some analysts have said the market has overreacted to government media criticism of the gambling industry, noting that government demands to protect minors were not new and that these players represented a small percentage of online gaming revenue.

Players under the age of 16 made up just 2.6 percent of gross gaming revenue in China in the second quarter, Tencent said.

© Thomson Reuters 2021

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