Tencent Holdings reports a 37% increase in revenue in the fiscal Q2

Tencent Holdings Ltd (HKG: 0700) published its quarterly financial results on Wednesday that came in stronger than what the analysts had anticipated. The company, however, is confronted with novel challenges as President Donald Trump signed an executive order last week that labels WeChat as a security threat.

As per the executive order, Tencent will face a ban in the United States if it doesn’t sell WeChat by mid-September. Tencent generates less than 3% of revenue and less than 5% of earnings from the U.S.

Shares of the company recorded an intraday gain of about 1.5% on Wednesday. At £51.61 per share, Tencent Holdings is currently more than 35% up year to date in the stock market after recovering from a low of £33.12 per share in March when the impact of COVID-19 was at its peak. Learn more about the financial analysis of a company.

Tencent’s Q2 financial results versus analysts’ estimates

According to Refinitiv, experts had forecast the company to print £12.48 billion in revenue in the fiscal second quarter. For profit attributable to the company’s shareholders, they had estimated £3.05 billion. In its report on Wednesday, Tencent topped both estimates posting a higher £12.71 billion in revenue and £3.66 billion in profit.

On a year over year basis, the Chinese multinational conglomerate saw a 29% growth in terms of revenue and a 37% increase in profit attributable to shareholders. Tencent announced earlier this year in June that it was interested in buying a sizeable stake in iQIYI (China’s video streaming platform).

Tencent accentuated a 40% growth in revenue from online gaming in Q2 to £4.24 billion versus £4.60 billion expected. Online gaming marks the largest source of revenue for Tencent.

Tencent’s revenue from smartphone games climbs 62% in Q2

The Shenzhen-headquartered company registered £3.98 billion of revenue from smartphone games that represents a 62% increase on an annualised basis. PC games revenue, on the other hand, surged 6% versus the comparable quarter of last year.

As per Tencent, its cloud business and media advertising unit took a significant hit in recent months due to the Coronavirus pandemic that weighed on advertising demand and raised new challenges in project deployment.

Tencent’s performance in the stock market was seen fairly upbeat last year with an annual gain of more than 20%. At the time of writing, the Chinese multinational conglomerate has a market cap of £490 billion and a price to earnings ratio of 47.72.