Seeking Alpha

Tencent beats estimates on gaming, WeChat growth; JD.com rallies

  • Tencent (OTCPK:TCEHY) had Q2 revenue of RMB19.75B ($3.21B), +37% Y/Y and above an RMB19.2B consensus. Net income rose 59% to RMB5.84B ($948M), above an RMB5.51B consensus.
  • WeChat monthly active users (MAUs) rose 11% Q/Q and 57% Y/Y to 438M. MAUs for Tencent's older QQ messaging/gaming platform totaled 829M, -2% Q/Q and +1% Y/Y. MAUs for the Qzone social networking platform totaled 645M, flat Q/Q and +3% Y/Y.
  • 521M QQ MAUs and 497M Qzone MAUs are now respectively using "smart devices."
  • Total value-added service (VAS) revenue rose 9% Q/Q and 46% Y/Y to RMB15.7B. Within the segment, online gaming revenue rose 7% Q/Q to RMB11.1B, thanks largely to mobile growth - Tencent recently disclosed it now has 600M+ mobile gaming users. PC gaming revenue was "broadly stable." Social networking revenue rose 15% Q/Q to RMB4.6B, thanks largely to mobile.
  • Online ad revenue rose 59% Y/Y to RMB2.1B, aided by video/social ad growth. E-Commerce revenue fell 40% to RMB1.3B, thanks to the JD.com (JD +4.3%) partnership. JD shares are rallying.
  • Gross margin rose to 62% from 54% a year ago, and op. margin to 40% from 32%. Tencent cautions mobile gaming revenue could be flat in 2H14, as the company focuses on optimizing the user experience.

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