Tencent up against worst margins ever as value drops $78 billion

Rising costs and continued investments will strain profits

Tencent up against worst margins ever as value drops $78 billion

Despite soaring to an all-time high in profits in January, Tencent has come back down with $78 billion shed in value.

That is according to Bloomberg, who reports that the Chinese tech and entertainment giant's quarterly financial report on Wednesday will show that rising costs and continued investments have strained profits.

Analysts are said to be concerned that the company is not yet able to bring in enough money from its mobile games to offset a decline in the PC unit, which is its most profitable platform.

As such, gross margin in the latest period is expected to dip below 47 per cent for the first time since 2003.

Short-term pain, long-term gain

Tencent has been active in investing in the various games ventures from online to streaming services.

It’s most notable deals included its $632 million and $462 million investments in games streaming service Douyu and Huya, as well as its $476 million investment in games developer Shanda Games.

The publishing giant also made additional investments in mobile games developers with $130 million and $72 million put into Kakao Games and Ourpalm respectively.

According to Digi-capital, The Chinese publishing giant led or participated in over $4 of every $10 invested in games companies worldwide in the 12 month run up to Q1 2018.

It’s also ramped up spending in other ventures this year as it competes with e-commerce rival Alibaba in online entertainment, payments, cloud computing and even retail, which is considered to be Alibaba’s home turf.

Tencent’s retail-focused deals this year include its backing of Carrefour SA’s China unit and a $5.4 billion investment in Wanda Commercial Properties.

The company also signed a cultural collaboration with the UK's Department for International Trade

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Staff Writer

Iain is a freelance writer based in Scotland with a penchant for indies and all things Nintendo. Alongside PocketGamer.Biz, he has also appeared in Kotaku, Rock Paper Shotgun, PCGamesN and VG24/7.