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Tencent’s Ad Revenue Misses Analysts’ Expectations

Chinese internet giant Tencent said its first-quarter revenue increased 16%, but growth in its advertising business was slower than expected.  Karen Chan of Jefferies wrote in a note to clients that Tencent’s ad revenue, which rose 25% to 13.4 billion yuan ($1.95 billion) in the quarter, was 11% below her estimate. Daiwa Capital Markets analyst John Choi also said the ad revenue was weaker than he expected. China’s economic slowdown could make some advertisers more cautious about their digital ad spending. 

Investors are closely watching Tencent’s ad revenue, as the company, which operates the WeChat messaging app, tries to sustain its growth despite uncertainties in its revenue from games. The online games business, Tencent’s biggest source of revenue, declined 1% in the first quarter as the company is still coping with the negative impact from China’s temporary suspension of approvals of new games last year.  Tencent’s net profit, meanwhile, rose 17%, beating analysts’ expectations, thanks in part to cost savings in sales and marketing.

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