Tencent shares rise after Q1 profit beats

Tencent shares rise after Q1 profit beats

However, in its earnings report for Q1 2018 released earlier today, Tencent laid all those fears to rest, smashing analyst expectations to post some of its highest ever revenue and profit increases, buoyed by a skyrocketing mobile games market.

Profit was also helped by one-time gains of nearly 7.6bn yuan from its investments in arenas like video and news.

Revenue rose 48 percent to 73.5 billion yuan, also surpassing estimates for 70.8 billion yuan.

Operating margin rose to 42 percent from 39 percent in the first quarter of previous year. But adjusted earnings-per-share, which strips out one-time items, came to 1.92 yuan, missing the 1.94 yuan average estimate.

Jefferies analysts wrote in an accompanying note that Tencent's gross profit margin was higher than expected with its " strong mobile game rebound", but added a structural business mix change might continue to weigh on the firm's margins.

Shares of Tencent were largely unchanged in Hong Kong before earnings were announced.

More news: Ford resuming production of lucrative F-Series trucks on Friday

Shares of Tencent Holdings opened up 7 per cent in Hong Kong on Thursday after it reported better-than-expected first-quarter results.

Tencent's gaming business has historically done well, with the PC games segment being the company's cash cow for a long time. The company has however been leery of barraging its users with ads - on Wednesday, it declared that it had raised the maximum number of ads that customers see on WeChat Moments, a function similar to Facebook's newsfeed, to just two a day, from one previously. The essay, written by veteran tech editor Pan Luan, claimed the company had "lost its dream" by becoming an investment company instead of continuing to develop great products in core areas such as search, e-commerce, information streaming, short video and cloud services. "Fortnite" was developed by Epic Games, a company that Tencent has a large stake in. "Smartphone games revenues alone were up 68 percent year-on-year to 21.7 billion yuan, thanks to titles such as 'Honour of Kings'".

But overall costs surged 51 percent.

Tencent Chairman and CEO Ma Huateng. The mobile version of Fornite was an instant hit in the United States market after its March launch, becoming the highest-grossing iOS game there.

WeChat had 1.04 billion monthly active users while QQ - the older of its two social networks - saw users drop 6.4 percent to 805.5 million at the end of the quarter.

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