Tencent Q4 revenue up 25%, but Covid-19 expected to impact next quarter

Tencent has reported total revenue of US$15.2 billion for the fourth quarter in 2019 on March 18, a year-on-year increase of 25%. While still missing estimates, this marks the company’s strongest quarter for the financial year.

Tencent’s stocks, listed on Hong Kong Stock Exchange, rose by 2.69% to HK$343 (US$44.21) per share from yesterday’s closing price of HK$334 (US$43.05) per share.

Photo credit: Tencent

The social and entertainment powerhouse reported nearly US$3.7 billion in profit, increasing by 29% from the same period in 2018. Additionally, the 2019 fiscal year saw Tencent report US$54.1 billion in revenue, a 21% year-on-year growth, and a net profit of US$13.5 billion.

“During 2019, we reinforced our leadership in consumer internet and extended our presence in industrial internet, while sustaining healthy operating and financial metrics,” said Pony Ma, CEO of Tencent, during the earnings call on Wednesday.

Revenues from value-added services, including games, video subscriptions, and music streaming, were 52.3 billion yuan (US$7.4 billion) in the quarter, up 20% year on year, or nearly half of the company’s total revenues.

Its online games revenue rose by 25% year on year to 30.3 billion yuan (US$4.3 billion), owing to hit mobile video games such as Peacekeeper Elite (a Chinese rebrand of Player Unknown’s Battlegrounds), as well as contribution from Supercell, a Finnish gaming company known for popular titles like Clash of Clans. Tencent became the Helsinki-based company’s largest shareholder in October 2019.

Online advertising revenue increased by 19% year on year to 20.2 billion yuan (US$2.9 billion). Social and other advertising revenues grew by 37% to 16.3 billion yuan (US$2.3 billion), primarily driven by advertising on WeChat Moments. The increase offset the drop in media advertising from Tencent Video and Tencent News.

Tencent’s revenues from the fintech and business services sectors saw year-on-year growth of 39%, reaching 29.9 billion yuan (US$4.2 billion) in the fourth quarter. The number of commercial payments recorded through WeChat Pay reached a new high, with over 1 billion commercial transactions per day.

However, Tencent’s sprawling empire is expected to take a hit from the coronavirus outbreak, which forced shops to stop operations and customers to stay home. On the other hand, its digital entertainment business may see a surge in the first quarter of 2020 with the sector booming as people stay home.

“We saw in February and the early part of March is that there was a very substantial negative impact on offline transactions,” James Mitchell, chief strategy officer at Tencent, said during the earnings call on Wednesday.

Tencent’s cloud services revenues exceeded 17 billion yuan (US$2.4 billion) in 2019. Tencent’s cloud service, office collaboration application, and educational service, including Tencent Meeting and WeChat Work, have played a major role in the nationwide “remote-work experiment” in the period after the Chinese New Year.

Currency converted from yuan and Hong Kong dollar to US dollar: US$1 = HK$ 7.76, US$1 = 7.09 yuan.

This report was first published on KrAsia.