Tencent (0700.HK) 1Q17 Results: Strong Beat Led by Strength in Gaming and Social Network

Executive Summary

• Tencent reported 1Q17 revenues of ¥49.6 billion, up 54.9% year over year. Non-GAAP diluted EPS was ¥1.49, up 41.0% year over year. The solid results were largely driven by the gaming and social network segments.
• Value-added services (VAS) revenues, which accounted for 71% of total revenue, increased by 40.6% year over year, mainly driven by strong revenue growth in both PC games and smartphone games.
• Advertising revenues were up 46.5% year over year, thanks to strong growth from the mobile media platform, higher ad fill rates in WeChat’s Moments and a higher click-through rate in WeChat’s Official Accounts.
• Other revenue surged 244.3% year over year, driven by mobile payment and cloud services. Management reiterated mobile payment as a key element of Tencent’s ecosystem rather than as a profit center.