China's Tencent quarterly earnings soar 89%, beating forecast

© Reuters. FILE PHOTO: Tencent's logo can be seen on its booth at Beijing International Trade Fair for Services (CIFTIS) in 2020

From Pei Li

HONG KONG (Reuters) – Chinese gaming and social media giant Tencent Holdings Ltd (HK 🙂 reported a forecast 89% increase in quarterly earnings on Thursday, fueled by video games and advertising businesses. The world's top-selling gaming company generated 38.5 billion yuan ($ 5.8 billion) in profits for the three months to September. According to Refinitiv, this was ahead of an average analyst estimate of 30.81 billion yuan.

Sales increased 29% to 125.4 billion yuan.

The Chinese giant has benefited from healthy growth in paying video game users in China and international markets. The flagship Honor of Kings had a record 100 million daily active users in the first 10 months of 2020.

Tencent said that following the COVID-19 outbreak, overall advertising activity in China appeared to be largely normalized, with rapid growth in sectors such as education, internet services, and e-commerce platforms.

However, Tencent said that revenue from the cloud and other business services, a potential future growth engine, has been impacted by the ongoing impact of the pandemic such as project delivery delays and new contracts.

"The year-over-year revenue growth rate was therefore lower than in previous quarters, which we expect to be temporary," Tencent said.

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