Tencent profits up 37% — can it last?
The internet giant behind WeChat — the app you need to complete almost every commercial and legal transaction in China — had an enormous windfall from COVID-19 lockdowns that supercharged internet use. But can the good times last as the U.S. government goes on the attack?
Internet behemoth Tencent Holdings Ltd. today reported that its revenue grew 29% year-on-year to 115 billion yuan ($16.6 billion) in the second quarter. Profits rose 37% to 33.1 billion yuan ($4.77 billion).
- “Monthly active users of its popular WeChat instant messaging platform grew 6.5% to 1.2 billion, while revenue from its core game business jumped 40% to 38 billion yuan,” notes Caixin.
- Revenue from fintech and business services rose 30% to 30 billion yuan ($4.32 billion).
What’s happening?
It’s the COVID-19, stupid. Lockdowns meant more screen time for everyone, from gamers (Tencent makes around a third of its revenues from games) to old ladies checking on their grandchildren via WeChat.
What’s next?
Despite the excellent quarterly results, Tencent has its eyes on the future, which is looking much more uncertain after the Donald Trump executive order banning U.S. companies and persons from doing business with WeChat. But the Shenzhen-based tech giant has plans to double down on the domestic market:
- Teng An Fund, Tencent’s fund distribution unit, will begin “offering selected investors investment advisory services this week…the latest sign that Chinese tech majors are bulking up in financial services closer to home amid growing scrutiny of their technology businesses overseas,” reports Reuters.
- In any case, the Trump administration ban, which does not target Tencent’s overseas gaming investments, may not have much effect on the company’s bottom line, as most WeChat revenues are made in China. A WeChat exit from the U.S. market will have “little impact on the company’s revenue and social media ecosystem,” according to an analyst from Guosen Securities cited by TechNode.
See also: Tencent says Trump WeChat ban may not apply to app within China from Bloomberg (porous paywall).
