Tencent's Q1 revenue up 43% on strong gaming & ad revenue growth

Tencent Holdings, China's biggest social network and online entertainment firm, on Wednesday said growth in its gaming and advertising businesses helped revenue rise 43% in the first quarter of 2016, beating analyst estimates.

The firm booked revenue for January-March of 32.0 billion yuan ($4.90 billion). That compared with the 30.66 billion yuan average of 10 analyst estimates compiled by Thomson Reuters.

Net profit rose at its quickest rate in over a year, by 34% to 9.27 billion yuan ($1.42 billion).

While online gaming has long been Tencent's main cash cow, expansion beyond games and advertising saw it invest 64 billion yuan ($9.8 billion) last year. Many of its deals are a long way from yielding returns, with losses in associates and joint ventures rising eight fold in 2015.

Such losses in the first quarter of 2016 more than tripled from the same period a year earlier to 1.1 billion yuan ($170 million). That was not enough to prevent Tencent's operating margin remaining at 42%.

Supporting the investment binge, online gaming revenue rose 28% in January-March to 17.09 billion yuan ($2.62 billion), bolstered by success in smartphone games, Tencent said. Online advertising revenue also jumped, by 73% to 4.7 billion yuan ($720 million).

Global monthly active users of Tencent's WeChat app reached 762 million at March-end, representing growth of 39% from a year earlier.

Tencent also flagged potential difficulty in the near future in its brand advertising business citing China's economic growth rate, which is languishing at 25-year lows.

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