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Tencent Q4 Profit Fall Short of Expectation Despite Strong Growth in Online Gaming

March 19, 2020 10:25 am

Beijing( PingWest)- Tencent Holding, operator of China’s biggest social media and video gaming business, announced lower-than-expected fourth quarter profits despite strong revenue growth in the period.

The company reported a total revenue of CNY105.8 billion for the fourth quarter of 2019, up 25 percent year-on-year driven by strong revenue growth in online gaming and cloud computing. However, the company’s Q4 net profit came in at CNY21.6 billion, which fell short of analyst’s average estimation of CNY22.8 billion.

Tencent has reviewed the performance of its core business such as online gaming, fintech, cloud computing business in the financial report.

Online games, the largest contributor of the company’s revenue, grew 25% year-on-year to CNY30.29 billion. The strong revenue growth in the sector was primarily driven by mobile games including “PUBG Mobile” and “Peacekeeper Elite”.

Tencent saw significant user growth in online gaming business during the coronavirus outbreak, according to Tencent’s president Martin Lau.

“Our user spent more time on online entertainment, including video and games during the coronavirus outbreak. But we shifted our main focus and resource to public services sectors and sectors that can help people to ride through the pandemic such as online health care and online education.” Martin Lau said.

The cloud computing and collaborative office service is one of the beneficiaries of the coronavirus outbreak in China as many employees staying indoors due to mandatory quarantines

Tencent meeting, a cloud-based communication software that combines video conferencing, online meeting, team messaging, file sharing and mobile collaboration, exceeded 10 million daily active users after two months of its launch in December.

Beside cloud computing, a strong performance in Wechat‘s mini programs shows Tencent is capable of competing with Meituan and Alibaba on digital lifestyle services.

Alipay, WeChat pay’s major rival, has open up its platform to 40 million service providers, enabling these third-party vendors to offer lifestyle service such as food delivery and hotel booking, retail, healthcare on its mobile payment platform.

Mini programs generated more than CNY 800 billion in transaction volume during 2019.

Looking forward, Tencent noted that its fintech business could be affected by slowdown in offline activities in the near future, but overall, the company remain positive about its fintech outlook.