Games Recovery Lifts China’s Tencent to 47% Quarterly Profit Increase

Sometimes described as the world’s largest games company in revenue terms, China’s Tencent increased its net profits by 47% in the three months from July to September. Gains were driven by both its domestic and international games businesses.

In addition to games, Tencent is China’s largest social media company, thanks toits ubiquitous WeChat/Weixin messaging platform) and its biggest long-form video streamer (Tencent Video and WeTV). In the music sector Tencent is China’s biggest music streamer and owns significant investment stakes in both Spotify and Universal Music Group.

For the third quarter of its current year, the group reported revenues of RMB167 billion ($23.9 billion), up 8% year-on-year. Net profit was RMB54 billion ($7.7 billion), leaving it with net cash of $13.6 billion (even after share buybacks).

International games revenues were RMB14.5 billion, up 9% year-on-year (or up 11% on a constant currency basis), due to robust performances from games including “PUBG MOBILE” and “Brawl Stars.” “Revenue growth for International Games substantially lagged gross receipts growth, as improved retention rates for certain titles led to us elongating revenue deferral periods,” the company said. Games revenues in China increased by 14% year-on-year to RMB37.3 billion, driven by games including “VALORANT,” “Honour of Kings,” “Peacekeeper Elite” and “DnF Mobile.”

Evergreen games, “Naruto Mobile” and “VALORANT” reached new highs in quarterly average daily-average-users (DAU). It launched “Delta Force,” the company’s first multi-platform first person shooter, which achieved high average user daily time spent and retention rates.

In international markets, VALORANT expanded from PC to PlayStation and Xbox with the launch of its console version in five key international markets. The game grew its gross receipts by over 30% year-on-year during the quarter.

Long-form video subscriptions increased 6% year-on-year to 116 million, after moving to a calculation based on daily subscriber numbers. It attributed the growth to “popular animated series and drama series.”

Its digital music operations, Tencent Music Entertainment reported its financial performance on Tuesday. These saw streaming music subscriptions increase by two million to 119 million and at the same time increase average revenues per user. Its still-lucrative social music entertainment activities (karaoke and live streaming) reported barely changed subscription numbers, but suffered a 25% cut in per user revenue.

Tencent’s earnings statement confirmed that the booming outlook for its value-added services activities was “partially offset by a decline in music-related and games-related live streaming revenues.” This reflects a regulatory environment that has put increased controls on live entertainment and made it harder to sell.