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Games and Advertising Lift Tencent to Record First Quarter Profit

Strong revenue from games and advertising lifted revenue and profit margins at Chinese social media giant Tencent. Net profits increased 65% year-on-year to reach $3.82 billion on revenues of $11.7 billion in the three months to end of March.

Value added services businesses expanded their revenues by 34%, games by 26% and advertising by 55%, year-on-year, the company said.

The company has shifted from holding cash to a net debt position, reflecting an acquisition spree in China and, increasingly, abroad. Asia’s largest company by market capitalization, Tencent reported $14 billion debt at the end of March, compared with $16 billion of cash at the same time last year.

Social networks revenues increased by 47% to RMB18.1 billion as WeChat user numbers passed 1.06 billion. “The increase primarily reflected growth in revenues from digital content services such as live broadcast, video streaming subscriptions and our music service namely WeSing, as well as from in-game virtual item sales,” Tencent said. “Media advertising revenues increased by 31% to RMB3.30 billion, primarily driven by revenue growth from Tencent Video due to an increase in video views, and new advertising formats within original productions.”

Tencent has invested heavily in video in the past year. Not only is it increasing spent heavily on original content creation, it has invested in other streaming platforms. It invested $632 million in game-streaming platforms Douyu in March, $462 million the same month on Huya. That was followed by a $95 million stake in online short video platform Pear, after the end of the quarter.

The results were announced after the close of the Hong Kong stock market, where Tencent shares are traded. Earlier Wednesday, Tencent shares were down 0.45% at HK$396.2. At that price the group has a market capitalization of $480 billion (HK$3.77 trillion).

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