The Strategist

Tencent's revenue drops for the first time in 13 years

08/16/2018 - 05:19

In the II quarter, Chinese tech giant Tencent Holdings Ltd recorded a drop in net profit for the first time in almost 13 years due to weaker performance in the mobile and computer games segment. This is reported by Reuters.

Tencent's net profit in April-June amounted to 17.87 billion yuan ($ 2.59 billion), a decrease of 2% in annual terms. This is the first decrease in profit since the third quarter of 2005.

Analysts polled by Thomson Reuters, on average, forecast a profit of 19.67 billion yuan.

The company's revenue in the II quarter was 73.68 billion yuan, compared to the expected 77.5 billion yuan. The revenue growth of 30% yoy was minimal since the second quarter of 2015.

Tencent's prospects are marred by a slowdown in the mobile games segment and concerns about regulatory issues. This week, Chinese regulators banned the company from selling the game "Monster Hunter: World", citing "numerous complaints" about its content.

Tencent's revenue from mobile games in April-June increased by 19% in annual terms, but decreased by 19%, to 17.6 billion yuan, compared to the previous quarter. Although the number of daily active users (DAU) has increased, revenue per user has not grown.

"In China, the DAU of our games for smartphones grew at double-digit rates in annual terms, but monetization per user decreased, as users switched to non-monetized tactical tournament games," Tencent said.

Revenues from games for desktop PCs decreased by 5% in annual terms and by 8% compared to the first quarter and amounted to 12.9 billion yuan. Revenues from online games, including smartphones and PCs, increased by 6% yoy to 25.2 billion yuan. Revenues from online advertising on various sites and services of Tencent increased by 39% in annual terms to 14.1 billion yuan.

The number of monthly active users of the WeChat instant messenger, owned by the company, increased by 9.9% year-on-year to $ 1.06 billion.

Revenues from Tencent's "other" business, including cloud and payment services, jumped 81% in the second quarter to 17.5 billion yuan.