Tencent’s gaming business continues to boom in Q2

13 Aug 2020

Image: © Sundry Photography/Stock.adobe.com

With people turning to video games to entertain themselves during restrictions put in place to limit the spread of Covid-19, Tencent has reported strong growth in its gaming division.

On Wednesday (12 August), Chinese technology firm Tencent announced its earnings for the second fiscal quarter of 2020.

The latest earnings call comes as the business faces increasing pressure in the US, with its subsidiary social media platform WeChat set to be banned through a White House executive order, alongside TikTok.

While it’s still unclear what the executive order will look like, company executives said they believe it is focused on WeChat in the US and not its other businesses there. However, according to their latest statement, they are still seeking clarification.

Despite concerns about WeChat’s future in the US, parent company Tencent has had a strong quarter. While advertising suffered in the three months through to the end of June, Tencent’s gaming business continued to boom as people around the world turned to video games for entertainment during the Covid-19 pandemic.

The figures

In Q2 of 2020, Tencent saw revenue rise by 29pc, year-on-year, to $16.53bn in the quarter – marking the firm’s fastest growth since the second quarter of 2018. The company saw a 37pc year-on-year rise of profit attributable to equity holders of the company, to $4.75bn.

In the gaming business, Tencent’s subsidiaries include Riot Games, Funcom and Sharkmob. The firm also has 40pc ownership of Fortnite developer Epic Games and 5pc ownership of Activision Blizzard.

As a result of the Covid-19 pandemic, Tencent saw its online game revenue grow 40pc year-on-year to $5.5bn, exceeding the growth seen in Q1 of 2020.

The company said that its gaming division saw an uptick in mobile gaming as a result of restrictions put in place due to the pandemic. Tencent’s smartphone gaming revenues came in at $5.1bn, which is a 62pc rise on the same quarter last year. PC gaming revenue fell 6pc compared to the second quarter of last year.

Outside of the significant revenue Tencent brought in from gaming, the company also saw a boost in other businesses, including its social media and fintech divisions.

The firm said that social network revenues increased 29pc compared to the same time last year, including revenue from its music subscription service as well as live broadcast service Huya, in which Tencent has a large stake. The company saw a 30pc year-on-year rise in its fintech and business services arm, which hit $4.3bn in the latest quarter.

With many companies cutting their advertising budgets to free up funds during the pandemic, Tencent’s ad revenue continued to grow, but not at the pace the company expected. Ad revenue rose 13pc year-on-year, which is a decline from Q1 of 2019, when the company witnessed 32pc year-on-year growth in that division.

After the firm disclosed its earnings for the latest quarter, stock climbed 3.1pc before the end of the day.

Kelly Earley was a journalist with Silicon Republic