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Tencent posts earnings beat while waiting for clarification on WeChat ban

Tencent’s gaming segment continues to grow, while the company is not certain how the unspecific WeChat ban in the US will impact its business.

Shenzhen-based social and entertainment tech giant Tencent’s (HKG: 0700) total revenue grew 29% year-on-year (YoY) to RMB 114.9 billion (USD 16.53 billion) in the second quarter of 2020, beating analyst expectations of RMB 112.72 billion (USD 16.25 billion), per the company’s latest earnings release.

Total revenue growth in the June quarter was the firm’s strongest in two years, while revenue from its core gaming business increased by 40% YoY, with smartphone titles like Peacekeeper Elite and Honour of Kings driving growth. In addition, its new title Valorant, a team-based action game, was the most-watched game on Twitch in the second quarter.

Tencent’s Valorant has gained serious traction in the second quarter of 2020. Source: Valorant

Tencent’s deepening cooperation with subsidiary game livestreaming platform Huya (NYSE:HUYA) drove a 29% YoY increase in revenue from social media.

WeChat, its flagship social app that was the target of an executive order from US President Trump, grew its user base by 6.5% during the quarter, while the number of subscribers to the company’s value-added services climbed by 20.4% YoY.

Meanwhile, Tencent mentioned on the earnings call that the proposed ban by the US may not extend to the app within China. Crucially, WeChat, the app named in the executive order, is the overseas version, while Weixin is the version used in China and drives most of Tencent’s revenue in this segment.

Many American multinationals use Weixin in China to sell products to Chinese consumers through programs built into the app.

John Lo, Tencent’s chief financial officer (CFO) commented that the executive order is focused on WeChat in the US and not other businesses in the country. “We are in the process of seeking further clarification from bipartisan parties in the US,” he said.