Chinese gaming and social media giant Tencent posted strong profit and revenue growth as spending through its mobile payment app returned after the country’s lockdown came to an end and users continued to flock to its hit video games.
The Shenzhen-based company’s net attributable profit was up 37 per cent from a year earlier to Rmb33.1bn ($4.8bn), while revenue rose 29 per cent year on year to Rmb114.9bn. Analysts had forecast sales of Rmb112.8bn, according to Capital IQ.
However Tencent faces looming US sanctions that yet could damage its business. Last week the Trump administration turned its sights on the company, issuing an executive order banning US companies from doing business with it and rival ByteDance.
Although the impact of the order remains unclear, it has sent Tencent’s shares tumbling 8 per cent since hitting all-time highs earlier this month.
The action gave US companies and individuals 45 days to halt transactions with its WeChat app. At the very least, it may force Google and Apple to remove the app from their US app stores, but analysts say it could go as far as making it impossible for US advertisers to market through WeChat in China, and could even cut Tencent off from the computer chips, servers and US software that it relies upon to operate.
Elsewhere, advertising sales on the company’s social platforms continued to grow, with revenue up 27 per cent year on year in the second quarter.
So far, Tencent’s formidable global gaming ambitions have not been targeted by the US, though restrictions could still escalate as they have for ByteDance and Huawei. The company’s online gaming segment reported 40 per cent sales growth from a year earlier as titles such as Peacekeeper Elite and Honour of Kings kept domestic and international users stuck to their smartphones.
Shoppers returning to markets and malls and using WeChat to pay helped lift its fintech business line 30 per cent from a year earlier and 13 per cent from the first quarter.
The US commerce department has a just over a month to interpret and enforce the rules against WeChat. The app is central to the lives of 1bn Chinese users, while millions of Chinese and others abroad use it to stay in touch with relatives or do business with those in the mainland, since Beijing has blocked many foreign-owned communication apps.