Tencent Posts 70% Surge in Profit, Buoyed by Revenue From 'Honor of Kings' -- 2nd Update

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Chinese internet giant Tencent Holdings Ltd. posted double-digit revenue and profit increases as it continued to grow its mobile-gaming, social-media and advertising businesses in the second quarter.

Tencent, one of China's largest publicly traded companies and the world's biggest videogame publisher by revenue, also operates the popular social-media app WeChat.

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Mobile-game revenue grew 54% and exceeded computer games revenue for the first time. Computer-game revenue grew 29%, but the company warned that future PC revenue growth rates would decline. The company posted 14.8 billion yuan ($2.21 billion) in mobile revenue and 13.6 billion yuan in computer revenue.

Its share price has rose 70% so far this year.

The company said its WeChat app, known in China as Weixin, saw 963 million monthly average users in the quarter, growing 19.5% from a year earlier.

Another of the company's social-media networks, QQ, saw a 5.4% decline in monthly active users to 850 million. Still, Tencent said the decrease was due to fewer casual users while engagement with core users increased. QQ also saw smart-device growth among younger users.

Online advertising revenue grew 55% to 10.15 billion yuan, driven by increased mobile video views as TV dramas and variety shows attracted users.

In all, profit grew 70% to 18.23 billion yuan, or 1.9 yuan a share, compared with 10.74 billion yuan, or 1.13 yuan a share, a year prior. Revenue grew 59% to 56.6 billion yuan. Analysts polled by Thomson Reuters had expected 53.03 billion yuan in revenue and profit of 1.52 yuan a share.

Chester Yung contributed to this article.

Write to Austen Hufford at austen.hufford@wsj.com

Global top-grossing mobile game "Honor of Kings" is the gift that keeps on giving for Tencent Holdings Ltd., the Chinese internet behemoth and world's biggest videogame publisher by revenue.

The Shenzhen-based company reported a 70% surge in profit to 18.23 billion yuan ($2.7 billion), buoyed by revenue from "Honor of Kings" and other mobile games; triple-digit growth in payment services; and a solid increase in online advertising.

The company beat analyst estimates by more than 30%, reporting overall revenue of 56.6 billion yuan ($8.45 billion), a 59% increase from a year earlier, and its fastest revenue growth in seven years.

Tencent shares were up about 1.4% in early trading in New York.

"Honor of Kings," which has been the No. 1 global mobile game since March according to App Annie and could debut as early as this fall in the U.S., helped push mobile-game revenues up 54% year over year, along with new titles in the role-playing genre.

PC games also increased 29% in revenue from the same period a year earlier, but management said it expects revenue growth rates to decelerate in future quarters.

Going forward, analysts said a time limit of playing "Honor of Kings" imposed on minors in early July shouldn't have a material impact of the game's revenue, as less than 5% of "Honor of Kings" gamers are below 12 years of age, according to estimates from Citi Research.

Tencent imposed the limit amid criticism that children were falling asleep in school because they had played "Honor of Kings" late into the night.

The company's social advertising revenues, which mainly come from the widely popular WeChat social media app, rose by 61% to 6 million yuan. The company now has 963 million monthly active users on WeChat, an increase of nearly 20% year over year.

Online advertising also helped Tencent's earnings, propelled by more users watching the firm's TV dramas and variety shows -- though Tencent President Martin Lau said it would be quite some time before the video business breaks even.

Tencent also expanded its self-service ad platform to include first-tier cities for putting promotions in WeChat's moments news feed, which boosted ad sales 55% from the same period a year prior. Mr. Lau said there was no urgency for increasing promotions quickly, saying the company is "airing on the very conservative side" in terms of upping ad inventory.

Tencent's Cloud operations, an area that Chief Executive Pony Ma has indicated is a priority, also had triple-digit growth. While providing cloud computing for gaming and video internet startups is Tencent's sweet spot, analysts say it must pivot to provide solutions for larger enterprises to compete with Alibaba, Baidu and Huawei.

Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com and Austen Hufford at austen.hufford@wsj.

(END) Dow Jones Newswires

August 16, 2017 10:49 ET (14:49 GMT)