Mobile games continue to drive rising online game revenue for Tencent

Tencent Sees Profit Increase of 61% Thanks to Games Business

However, those feats were dispelled by the technology giant.

Tencent reported net revenue of 73.5 billion yuan (about US$11.6 billion) and a net profit of 23.3 billion yuan (almost US$3.7 billion). Revenue was 48% up on a year on year basis. That represented a 61 percent year-on-year rise.

Tencent's margins rose or fell last quarter depending on what's included. The owner of the giant WeChat messaging platform opened its wallet to sustain growth as PC gaming slows, investing in cloud computing, entertainment and physical retail to lock horns with Alibaba Group Holding Ltd. Anchored by its marquee title, the smartphone games business yielded 68 percent growth in the quarter. The company has however been leery of barraging its users with ads - on Wednesday, it declared 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.

There's an argument to be made for stripping out extraneous items because Tencent runs the games and social side of the business itself, but doesn't have direct control over investees.

The broader online game business was driven by two major hit games. The first PlayersUnknown's Battleground (PUBG), which is a huge multiplayer game online. Their parent company Tencent first became China's largest tech company in terms of market capitalization in 2016, and is now going back and forth with e-commerce behemoth Alibaba in the race for this title.

"Mobile game growth was very strong, as the first quarter is usually a good season when users spend more time on their devices during the holidays", said Benjamin Wu, a Shanghai-based analyst with Pacific Epoch. It's a tournament-style game that is popular in e-sports, which is competitive video gaming. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months.

Tencent, the world's largest videogame company, has lost nearly $90 billion of its market value since March, due to concerns about slowing growth and shrinking margins. Earlier this month it led a US$820 million round of funding in Shenzhen-based UBTECH Robotics, making it the world's most valuable AI start-up with an estimated valuation of US$5 billion. It is available as well on mobile. Now unavailable in China, it will be launched in the country within the next few months.

Shares of Tencent have come under pressure of late and are off by 17% from an all-time high from January.

Related news: