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Tencent Q4 revenue up 25%, but coronavirus expected to impact next quarter

Revenues from online entertainment and office collaboration saw a boost while the giant’s fintech business declined.

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Tencent Holdings Limited (0700.HK) announced a total revenue of USD 15.2 billion for the fourth quarter in 2019 on March 18, a year-on-year (YoY) increase of 25%. While still missing estimates, this makes it the year’s strongest quarter.

Tencent’s stocks, listed on Hong Kong Stock Exchange, rose by 2.69% to HKD 343.0 per share from yesterday’s closing price of HKD 334.0 per share.

The social and entertainment powerhouse reported USD 3.65 billion in profit, increasing by 29% from the same period in 2018. Additionally, the 2019 fiscal year saw Tencent report USD 54.1 billion in revenue, a 21% YoY growth, and a net profit of USD 13.5 billion.

“During 2019, we reinforced our leadership in Consumer Internet and extended our presence in Industrial Internet, while sustaining healthy operating and financial metrics,” said Pony Ma, CEO of Tencent, during the earnings call on Wednesday.

Revenues from value-added services, including games, video subscriptions and music streaming, were RMB 52.3 billion in the quarter, up 20% YoY, or nearly half of the company’s total revenues.

Its online games revenue rose by 25% YoY to RMB 30.3 billion, owing to hit mobile video games such as Peacekeeper Elite (a Chinese rebrand of Player Unknown’s Battlegrounds), as well as contribution from Supercell, a Finnish gaming company known for popular titles like Clash of Clans. Tencent became the Helsinki-based company’s largest shareholder in October of 2019.

Online advertising revenue increased by 19% YoY to RMB 20.2 billion. Social and other advertising revenues grew by 37% to RMB 16.27 billion, primarily driven by advertising on WeChat Moments. The increase offset the drop in media advertising from Tencent Video and Tencent News.

Tencent’s revenues from the fintech and business services sectors saw YoY growth of 39%, reaching RMB 29.9 billion in the fourth quarter. The number of commercial payments recorded through WeChat Pay reached a new high, with over 1 billion commercial transactions per day.

However, Tencent sprawling empire is expected to take a hit from the coronavirus outbreak, which forced shops to stop operations and customers to stay home. On the other hand, its digital entertainment business may see a surge in the first quarter of 2020 with the sector booming as people stay home.

“We saw in February and the early part of March is that there was a very substantial negative impact on offline transactions,” James Mitchell, Chief Strategy Officer at Tencent said during the earnings call on Wednesday.

Tencent’s cloud services revenues exceeded RMB 17 billion in 2019. Tencent’s cloud service, office collaboration application and educational service, including Tencent Meeting and WeChat Work, have played a major role in the nationwide “remote-work experiment” in the period after Chinese New Year.