Earnings

Tencent Net Income Rises Despite Slow Sales, Economy In China

Tencent

Tencent, China’s popular online and entertainment company, saw its slowest sales growth since it went public in 2004, as it battled a sputtering economy and tried to revitalize a gaming division that’s seen some setbacks, according to a report by Bloomberg.

Despite these obstacles, the company posted a 17 percent rise in net income, which was better than analysts predicted. The rise was aided by a one-time gain of upwards of $1.5 billion from various growing valuations of its investments in gaming and finance companies around the world. The company’s sales gain, however, was 16 percent, the lowest it’s ever been.

Tencent and rival Alibaba are both struggling to sustain growth as China’s economy continues to slow down. The fact that the country is still in a fight with the U.S. over trade has not helped.

Tencent has launched a new game that it hopes will help turn things around, after regulators started allowing the release of new gaming ventures. The company is also putting money into video and news projects to woo back customers from Chinese startups like ByteDance.

“Missing consensus top-line estimates is not ideal, but the bright spot is growth came where it mattered — in games, which is their most profitable segment,” said Vey-Sern Ling, an analyst at Bloomberg Intelligence. “The 11 percent sequential jump in mobile game sales bodes well for the sustained recovery of the business over 2019.”

Alibaba shares have gained 28 percent this year, and Tencent follows with 19 percent. Tencent’s 17 percent rise in net income came out to about 27.21 billion yuan ($4 billion) in Q1, beating out the 19.4 billion yuan estimate by analysts.

Tencent is trying to make up for the slowdown in advertising and game revenue by exploring new business opportunities. On Wednesday (May 15), the company said that FinTech division expanded revenue 44 percent to 21.8 billion yuan in the March quarter, which makes it one of the company’s fastest growing sectors.

“Looking forward, we are pursuing multiple initiatives to revitalize growth,” Chief Strategy Officer James Mitchell said.

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