Tencent released its 2016 Q3 financial report, with payment-related services and cloud services becoming new business growth points

This afternoon, Tencent released its third quarter financial report for 2016. Revenue from payment-related services and cloud services increased by 348% year-on-year, a significantly higher growth rate than other businesses.

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2016 Third Quarter Results Highlights:

Total revenue was RMB 40.388 billion, an increase of 52% over the same period last year.

Operating profit was RMB 14.46 billion, up 40% from the same period last year; operating profit margin dropped from 39% in the same period last year to 36%.

Profits for the period were RMB 10.776 billion, up 42% from the same period last year; net profit margin dropped from 29% in the same period last year to 27%.

Profit attributable to the company's equity holders was RMB 10.646 billion, an increase of 43% over the same period last year.

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Revenue structure:

Value-added services accounted for about 69.2% (in the fourth quarter of 2015, this figure was 75%; in the second quarter of 2016, this figure was 71.9%). Among them, online game revenue was 18.166 billion yuan, and social network revenue was 9.809 billion yuan - this growth was mainly driven by the growth of digital content subscription services and virtual props sales revenue.

Online advertising accounted for about 18.4% (in the fourth quarter of 2015, this figure was 18.8, basically the same). Online advertising revenue was 7.449 billion yuan, of which performance advertising revenue was 4.368 billion yuan - mainly due to advertising revenue from WeChat Moments, mobile news applications and WeChat public accounts; brand display advertising revenue was 3.081 billion yuan.

Others (mainly payment-related services and cloud services) accounted for approximately 12.3% . Revenue from other businesses increased by 348% year-on-year to RMB 4.964 billion in the third quarter of 2016.

Ma Huateng said: "In the third quarter of 2016, our core businesses recorded strong financial performance, especially smartphone games and social advertising businesses, both of which achieved year-on-year revenue growth higher than the industry and maintained healthy profit margins. At the same time, ecosystem basic services including online payment and cloud services have also made significant progress in coverage and usage."

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User activity of major products

• The number of monthly active QQ accounts was 877 million, a 2% increase over the same period last year.

  
  

• The number of monthly active accounts on QQ smart terminals reached 647 million, a 1% increase over the same period last year.

  
  

• The maximum number of concurrent online QQ accounts (quarterly) was 250 million, a 5% increase over the same period last year.

  
  

• The combined monthly active account numbers of WeChat and WeChat reached 846 million, a 30% increase over the same period last year.

  
  

• The number of monthly active accounts on QQ Space reached 632 million, down 3% from the same period last year.

  
  

• The number of monthly active accounts on QQ Space smart terminals reached 584 million, an increase of 1% over the same period last year.

  
  

• The number of registered accounts for paid value-added services was 105 million, an increase of 19% over the same period last year.

We can see that the proportion of Tencent's game revenue is declining quarter by quarter, and "other businesses" including payment-related services and cloud services are increasingly contributing more revenue to Tencent. This should be considered a good signal.