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Covid-era gaming surge sends Tencent's sales past estimates
TENCENT Holdings Ltd has expanded its gaming empire - already the world's largest - in defiance of the economic downturn, and grown its revenue by a faster-than-expected 29 per cent.
Sales rose to 114.9 billion yuan (S$22.6 billion) in the three months ended June, versus the 112.4-billion-yuan average forecast. Net income was 33.1 billion yuan, against the 27.3 billion yuan projected.
China's biggest social media company has benefited from an Internet resurgence during Covid-19, but is grappling with economic malaise as well as a US WeChat ban with potentially far-ranging impact. Tencent executives will seek to reassure the market it can withstand a White House campaign that has already ensnared Huawei Technologies and dozens of Chinese up-and-comers, in part by focusing on its core home market.
Tencent won approval from Beijing to earn from Call of Duty Mobile, the smartphone version of a long-running franchise that will underpin its gaming business, and has charted a line-up of new titles for 2020 to shore up resilient franchises Peacekeeper Elite and Honor of Kings. It is driving talks to merge US-listed Huya Inc and DouYu International Holdings Ltd to create a Twitch-like US$10 billion local leader in games streaming.
One risk to its outlook was the surprise delay of Mobile Dungeon & Fighter, though analysts expect eventual approval for a Nexon Co title that is supposed to be Tencent's tent-pole for the second half.
"This will be a big year for Tencent games," China Merchants Securities analyst Leo Liu said. But there is concern about the delay of Dungeon & Fighter because it is Tencent's gaming blockbuster and masterpiece, which may affect performance ahead, he said.
China's No. 2 company had gone on a tear, gaining more than US$280 billion of market capitalisation since a March trough, before US President Donald Trump signed an executive order to label WeChat a national security risk.
The pandemic may also spur quicker adoption of Tencent's payments, cloud computing and video-conferencing services. BLOOMBERG