WeChat Ad-Revenue Boom Buoys Tencent Earnings in Q3

Chinese tech giant Tencent Holdings reported quarterly earnings that beat Wall Street forecasts, largely due to a “social and other” advertising sales jump of 61 percent year-on-year. Much of the increase came from ad revenues related to WeChat Moments and mini-programs, the company said. A 50-percent climb in WeChat Pay volume was another bright spot.

Despite its shares losing more than $240 billion in market value so far this year, Tencent Holdings, a conglomerate of Internet businesses, has apparently been able to make adjustments to improve profitability as it awaits Chinese government regulations on the online gaming industry. With the quarterly results, it became the first major Chinese company to please investors on that front in weeks.

The luxury retail industry may be credited with the increased advertising revenue, particularly as many of those brands now have WeChat mini-programs. Over the last year, about 90 percent of companies placing ads on WeChat Moments used the tag “luxury” for their products, according to company data. Meanwhile, consumers chose luxury brand ads from Tiffany, Cartier, and Maserati as their favorites on the platform in Q3.

In over-the-counter trading, Tencent shares were up about 5 percent, to $36.91, at 11 a.m. EST.

Tencent also reported continued growth in the number of monthly active users (MAU) on WeChat, which surprised some analysts. The company said that MAUs increased 10.5 percent year-on-year with improved engagement attributed to growth in mini-programs and video viewing.

WeChat Pay was another highlight of its Q3 2018 earnings as daily transaction volume of the mobile payment option increased 50 percent from last year. It expects further growth thanks to its “Cross-Border Mobile Payment services, allowing WeChat Pay HK users to conduct RMB-denominated transactions with Hong Kong dollars in Mainland China.”

Analysts consensus for the quarter expected 23 percent year-on-year growth to $11.56 billion (RMB 80.41 billion), according to Bloomberg. Tencent beat that estimate with $11.59 billion (RMB 80.595 billion) in revenue, an increase of 24 percent year-on-year and 9 percent quarter-on-quarter. Additionally, the company’s net profit margin increased one percentage point from the previous year to 29 percent.

Going forward, some analysts predict that revenue growth will slow along with China’s economic slowdown. In the first three quarters of 2018, Tencent reported 33 percent growth in revenue from the previous year.


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