Tencent Q3 revenue jumps above expectations
Internet company opens its wallet to drive growth in slowing economy
HONG KONG: Tencent Holdings Ltd’s growing appetite for spending on new businesses helped fuel a stronger-than-expected rise in revenue despite a weakening Chinese economy.
Asia’s largest internet company ratcheted up spending by 69% in the third quarter to bankroll forays into content, cloud computing, online finance and video-streaming. That in turn drove a faster-than-anticipated 52% rise in revenue to 40.4 billion yuan (US$5.9bil) for the operator of social media phenomenon Wechat.
Like arch-rival Alibaba Group Holding Ltd, Tencent is intent on exploring new businesses beyond its traditional stronghold, hoping to counter a long-term deceleration of the world’s second largest economy. It’s building data centres to offer cloud services to corporate clients, developing an online finance operation, and amassing a content library to underpin a Netflix-like video streaming site. All that comes at a cost. “Tencent’s margins were weaker mostly because of its expansion into new business, including payments and cloud,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Services LLP.
Net income grew 43% to 10.6 billion yuan (US$1.5bil) in the three months ended September, the Shenzhen-based company said. But that came in slightly below the 10.7 billion-yuan average of analysts’ estimates compiled by Bloomberg.
The company’s efforts are beginning to show. Revenue from its “others” segment -which includes payments and the cloud -more than quadrupled to 4.96 billion yuan in the quarter. Cloud services alone more than tripled after more enterprise customers signed on, particularly from the games, video and on-demand industries.
This year, Tencent signalled its willingness to spend by agreeing to acquire control of Clash of Clans studio Supercell Oy for US$8.6bil. It’s said to have budgeted at least US$295mil this year and next to movies in China and Hollywood.
It’s also buying the rights to anime, comics and novels to convert into movies and mobile games. — Bloomberg invest in