Tencent Profits Increase by 41% in Q3

Patrick Frater

China’s social media giant Tencent powered ahead with profits growth of more than 40% in the nine months to September. The acquisition of games maker Supercell barely made a dent.

Revenues grew by 52% in the third quarter and non-GAAP net profit grew 42% to $1.71 billion (RMB11.7 billion). For the first nine months of 2016 non-GAAP net profit grew 41% to $4.83 billion (RMB33.1 billion.)

Games accounted for 45% of revenue, while social networks contributed 24%. The company said that users were increasingly willing to pay for online services and subscriptions, and that it was increasing efforts against piracy.

Tencent’s older messaging platform, QQ held stable with 877 million monthly active users (on all devices), while newer WeChat achieved 30% user growth and hit 846 million MAUs.

Where the Supercell purchase (from Japan’s SoftBank) had an impact was on the balance sheet. Net debt increased by 70% year-on-year to $13.1 billion (RMB90 billion) as Tencent made a pre-payment of $3.7 billion for the “Clash of Clans” developer. Tencent said that $1.2 billion of that was subsequently recouped after the financial quarter from its consortium partners.

The results were reported after the Wednesday close of the Hong Kong stock exchange, where the company’s shares closed up nearly 2% at HK$196.9. At that price the group has a market capitalization of US$240 billion (HK$1.86 trillion.)

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