China's Tencent eclipses expectations to post 58 percent jump in first-quarter profit

[May 17, 2017]  (Reuters) - Tencent Holdings Ltd, China's biggest gaming and social media firm by revenue, overshot estimates to post a 58 percent rise in first quarter profit on Wednesday, aided by strong growth in gaming and digital payments.

The results represent Tencent's highest quarterly profit growth in 2-1/2 years, reaching 14.3 billion yuan ($2.08 billion) for the quarter. That was above a median forecast for a 13.2 billion yuan profit from eight analysts polled by Reuters.

The firm, Asia's most valuable company with a market value of $316 billion, has sought to boost profits this year by expanding the use of its payments app, WeChat Pay, among local and international merchants. It wants to provide services for every shop owner in China within two years.

It has also diversified its gaming portfolio and expanded new business lines, including cloud and artificial intelligence.

Quarterly revenue was 49.5 billion yuan, representing a 55 percent year-over-year rise, compared to 32 billion yuan a year earlier.

The firm said its online games segment, which includes popular titles "Honour of Kings" and "Dragon Nest Mobile", grew 34 percent to a record 22.8 billion yuan in the first quarter.

China is the world's largest gaming market by revenue, and is expected to account for roughly 25 percent of global game sales in 2017, according to research firm NewZoo.

Global monthly active users of WeChat reached 938 million during the first quarter versus 762 million from a year earlier, it said.

Tencent's booth is pictured at the Global Mobile Internet Conference (GMIC) 2017 in Beijing, China April 28, 2017. REUTERS/Jason Lee

The app, which contains its own mini app store and includes payment, taxi-booking and wealth management tools, is the world's third-largest messaging app after WhatsApp and Facebook Messenger.

During the first quarter, Tencent announced plans to expand its business lines overseas, including setting up an AI research lab in Seattle and plans for five new data centers in Europe, India, South Korea and Russia.

Tencent has also recently sought to grow subscriber bases on its music platform with new content partnerships.

On Tuesday, the firm announced it has entered into a licensing deal with U.S.-based music firm Universal Music Group (UMG), its latest effort to boost the number of paying users on its expansive media platforms, which are still largely free.

Revenue from online ads grew 47 percent to 6.9 billion yuan, while social networks revenue grew by 56 percent to 12.3 billion yuan.

(Reporting by Cate Cadell in Beijing and Supantha Mukherjee in Bengaluru; Editing by Sunil Nair and Randy Fabi)

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