© Reuters. FILE PHOTO: A Tencent logo is seen during the World Internet Conference (WIC) in Wuzhen, Zhejiang Province, China, Nov. 23, 2020. REUTERS / Aly Song / File Photo
From Brenda Goha
SHANGHAI (Reuters) – Chinese games and social media giant Tencent Holdings (OTC 🙂 beat forecasts with earnings up 29% in the second quarter, helped by a surge in popular game revenue and growth in online advertising revenue .
The strong demand for games such as “Honor of Kings” and “PUBG mobile” compensated for a decline in sales from the battle royale title “Peacekeeper Elite”.
Net income for the three months ended June was 42.6 billion yuan ($ 6.6 billion), above Refinitiv’s consensus estimate of 34.4 billion yuan. Earnings were also boosted by increasing the fair value scores of some of the companies in which the company invested.
Sales rose 20% to 138.3 billion yuan, with mobile game sales increasing 13%.
The results come amid investor concerns that Tencent will remain mired in an onslaught of regulatory measures Chinese authorities have imposed on multiple sectors, with the tech industry being hardest hit.
In particular, regulators have launched a series of antitrust investigations, citing the need to improve data protection and urging better treatment of consumers.
Tencent was prevented from entering into exclusive music rights deals and saw its $ 5.3 billion merger plan. DouYu International Holdings (NASDAQ 🙂 Ltd and Huya (NYSE 🙂 Inc were blocked by the Chinese market regulator last month.
The world’s largest gaming company by revenue also took a hit after an article in the state media labeled online games “spiritual opium” and raised concerns about their impact on children.
As a result of these consequences, Tencent temporarily lost its crown as Asia’s largest company by market capitalization to chipmaker TSMC earlier this week. Its stocks are down about 8% 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.
Players under the age of 16 accounted for just 2.6% of gross gaming revenue in China in the second quarter.
Last month, new user registrations in mainland China were also temporarily suspended for WeChat, the country’s dominant instant messaging platform, in order to upgrade its security technology.
Tencent said the company is very focused on compliance and risk management.
($ 1 = 6.4805)
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