China's Tencent 2Q profit falls 2%, first decline in nearly 13 years

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HONG KONG (Aug 15): Chinese technology giant Tencent Holdings Ltd on Wednesday reported a surprise 2% fall in second-quarter net profit, its first decline in nearly 13 years, due to slower growth in mobile games and a drop in PC gaming.

China's largest social media and gaming firm said April-June profit fell to 17.87 billion yuan (US$2.59 billion), lagging the 19.67 billion yuan average of 12 analyst estimates compiled by Thomson Reuters.

The outlook for the most valuable company listed in Asia has been overshadowed by a slowdown in mobile gaming and concerns over regulatory hiccups as the Chinese regulator this week blocked Tencent's sale of the blockbuster game "Monster Hunter: World" upon debut.

Mobile gaming revenue rose 19% year-on-year in the quarter to 17.6 billion yuan, representing a 19% sequential decline. The company blamed that on "non-monetisation of popular tactical tournament games and timing of new game releases".

Tencent has yet to receive regulatory approval to monetise survival-themed game PlayerUnknowns' Battlegrounds and to introduce Fortnite, a tactical tournament game developed by its portfolio company Epic Games.

Trading in its shares has been volatile this year. Since the stock's peak in January, Tencent has lost around US$170 billion in market value.

Revenue rose 30% to 73.68 billion yuan in the latest quarter, lagging 16 analysts' average estimate of 77.5 billion yuan. That represented the slowest quarterly revenue growth since the second quarter of 2015.

Revenue from PC games dropped 5% year-on-year and 8% quarter-on-quarter.

Users of its popular WeChat app grew incrementally to 1.06 billion.

(US$1 = 6.9099 Chinese yuan renminbi)