HONG KONG (Reuters) – High demand for video games during COVID-19 lockdowns buoyed Tencent Holdings’ first-quarter revenue and profits, with blockbuster games PlayerUnknown’s Battlegrounds Mobile and Honor of Kings helping it beats forecasts.
The Chinese company’s video games business, which generates more than a third of its revenue, saw growth of 31% to 37.30 billion yuan ($5.26 billion) as people idled away the time in front of screens and used online multiplayer games to spend virtual time with friends.
Its flagship games PlayerUnknown’s Battlegrounds (PUBG) Mobile and Honor of Kings topped mobile games revenue globally in March, analytics firm Sensor Tower said, reinforcing Tencent’s status as the world’s largest gaming firm by sales.
In-game spending on things like power-ups, object skins and accessories on PUBG Mobile alone surged to $232 million, more than three times what the title generated in March 2019.
Average revenue per user of Tencent’s mobile games jumped from 62.9 yuan in Q4 to 85.2 in Q1 as a result of limited offline entertainment options, Jason Zhou, an analyst with Guotai Junan Securities, calculated.
However, Tencent’s President Martin Lau said that in-game consumption was reverting to normal levels after the May 1 holiday as people began to return to work.
DUNGEON, FIGHTER MOBILE PROMISE GROWTH
Global spending on digital games surged to $10 billion in March, the highest monthly total ever, according to Nielsen’s game data arm SuperData.
Tencent’s stock has jumped nearly 14.38% this year, against a 15% decline in Hong Kong’s broader Hang Seng index. Meanwhile shares in its US-listed rival, which is focused on e-commerce rather than gaming, have dipped by almost 6% over the same period.
Japanese rival Sony’s gaming business has also benefited from lockdowns; the division was a bright spot in otherwise bleak annual results, bringing in more money as consumers downloaded its gaming software.
Alex Liu, an analyst with China Renaissance, said the lockdown boost was unlikely to be sustained, but strong deferred revenue was likely for the rest of the year and new titles, including Dungeon and Fighter Mobile, would deliver robust growth.
“The pandemic expedited the digitalisation of people’s way of life…Tencent is very mature in the monetisation of its current products,” Liu said.
James Mitchell, Chief Strategy Officer, said the coronavirus impact had heightened business awareness of the need to be online and the company would cater increasingly for that.
“This is the trend as Tencent swtiches gear to focus more on serving businesses,” Zhou said.
Tencent’s overall revenue jumped 26% to 108.07 billion yuan ($15.24 billion), while net profit rose 6% to 28.90 billion yuan for the three months through March, with both ahead of the average analyst estimate, Refinitiv data showed.
The company said its group online advertising revenue surged by 32%, with gaming and education-related ads on WeChat and its other apps helping it buck a broader advertising downturn as the global economy reels from the pandemic.
Social media advertising revenue grew 47%, highlighting a shift in behaviour as many people were confined to their homes. However its revenue from media ads fell 10% due to lower revenues from its video and news platforms.
($1 = 7.0930 Chinese yuan renminbi)
(Reporting by Pei Li and Brenda Goh; Editing by Alexander Smith, Pravin Char, Louise Heavens and Barbara Lewis)
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