Tencent Reports 43% Profit Increase in Third Quarter

17 Nov

On Wednesday, Tencent said profit in the July-September period increased 43% year-on-year to 10.65 billion yuan ($1.55 billion) from 7.44 billion yuan a year earlier, while revenue rose 52% to 40.39 billion yuan. Strong revenue growth from mobile games and advertising drove that growth. Tencent generates most of its revenue by distributing games and ads through social-networking platforms like WeChat, which has more than 800 million users.

Tencent’s quarterly results highlighted the excellent performance of smartphone games, which helps to offset slowing growth in revenue from PC games. In the third quarter, Tencent’s revenue from smartphone games rose 87%.

To tap new revenue sources, Tencent has been bulwarking its advertising business by placing more targeted ads on its social-networking platforms. In the next few years, advertising revenue is expected to be a major driver of Tencent’s growth.

In recent years, Tencent has expanded its gaming business overseas through acquisitions. Last month, a group of Chinese investors led by Tencent completed an $8.6 billion deal to buy a majority stake in Finland’s Supercell Oy, which makes top-selling games like “Clash of Clans” and “Clash Royale.”

While games account for nearly half of Tencent’s overall revenue, the company has been trying to earn more revenue from advertising. In the third quarter, Tencent’s ad revenue rose 51% from a year earlier.

Since 2015, Tencent has advertising in WeChat’s Moments section for photos and updates. In the quarter ended September 2016, Tencent said WeChat was one of the main contributors to its ad revenue growth.