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Tencent Q2'19 revenue bolstered by gaming segment recovery

China's internet giant Tencent Holdings Ltd. posted 88.82 billion yuan in revenue for the June quarter, a 21% year-over-year increase attributed to strong growth in its mobile gaming, fintech and other online service sectors.

Total online games revenue increased 8% year over year to 27.31 billion yuan, according to its release. Smartphone games revenue was 22.2 billion yuan, a 26% year-over-year increase. Tencent released 10 games in the June quarter, compared to only one in the first quarter due to tighter regulations introduced in 2018 and related game approval delays this year.

The online multiplayer battle game "Peacekeeper Elite," also known as "Game for Peace," has gained over 50 million daily active users since its May release and has started to be monetized with the promotion of season passes. The game is a replacement for the blockbuster "PlayerUnknown's Battlegrounds" that did not gain regulatory approval in China.

"We were quite happy with the recovery in smartphone game revenue," CEO Pony Ma said on a Aug. 14 earnings conference call.

Fintech and business services revenues grew 37% year over year to 22.89 billion yuan in this quarter, mainly driven by commercial payments. The number of users, merchants, transaction values and revenue all increased rapidly in the commercial payments sector, but Tencent did not give detailed numbers.

"We have the most daily active users as well as monthly active users among payment platforms in China," Tencent President Martin Lau said.

Tencent's online advertising revenue grew 16% year over year to 16.41 billion yuan in the second quarter. Advertising on social and other platforms saw revenue increase 28% year over year but media advertising decreased 7%.

"The macro environment for advertising will remain difficult in China in the rest of this year," Ma said. The market is suffering from oversupply which may continue into next year, according to Ma, while the delayed screening of several TV dramas on Tencent's video platform due to China's media content regulations contributed to the dip in advertising performance.

Tencent reduced its capital expenditure by 38% year over year to 4.36 billion yuan, due to the company's efforts to control costs, according to Chief Strategy Officer and Senior Executive Vice President James Mitchell. However, the company could spend more to promote new games going forward, he said.

The profit attributable to equity holders of the company in the quarter was 24.14 billion yuan, or 2.52 yuan per share, compared to 17.87 billion yuan, or 1.87 yuan per share year over year. The S&P Global Market Intelligence EPS consensus for the reporting period was 2.16 yuan on a GAAP basis.

As of Aug. 13, US$1 was equivalent to 7.0532 Chinese yuan.