Tencent's profit spikes as its core gaming business shows signs of slowing down

  • Tencent posted better than expected earnings, beating on both the top and bottom lines.
  • But its revenue grew at the slowest pace in three years.
  • Core online gaming sales dropped 4% in the wake of a Chinese clampdown on licenses.
  • Watch Tencent trade live.

Chinese tech giant Tencent on Wednesday posted better-than-expected earnings for the third quarter, sending shares up 2%. However, its core gaming business showed signs of slowing down.

Tencent earned 2.47 Chinese yuan per share, beating the 1.96 Chinese yuan that was expected by Wall Street, according to Bloomberg data. It generate revenue of 80.6 billion Chinese yuan ($US11.7 billion), edging out the 80.4 billion Chinese yuan that was anticipated.

Its revenue increased 24% year-over-year, driven primarily by growth in payment-related services, online advertising, digital content sales, and cloud services. Despite that, top line growth was the slowest in three years as a Chinese clampdown on gaming licenses continued to weigh on its core online-gaming business, which saw a 4% in revenue.

“During the third quarter of 2018, we registered strong operating results in our businesses and maintained healthy financial metrics,” CEO Ma Huateng said in the press release.

“Our advertising, digital content, payment and cloud services sustained robust activity and revenue growth, and now account for the majority of our revenue. For our game business, we implemented stringent self-imposed limitations on games playing by minors, which we believe put the game industry on a healthy and more solid foundation for future development.”

Last quarter, Tencent reported its first profit decline in almost 13 years, exhibiting a trend of disappointing results from technology companies amid China’s economy cooling down. Tencent shares have fallen 20% since releasing those results. It has seen $US200 billion of market cap wiped out since February.

Shares were down 29% this year through Tuesday.

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