Biz / Tech

Tech leaders report strong Q2 results despite glare of tighter scrutiny

Ding Yining
Tencent beats expectations with 20 percent revenue gain, while VIPShop bumped income by nearly 23 percent.
Ding Yining
Tech leaders report strong Q2 results despite glare of tighter scrutiny

Internet companies remain upbeat amid tightening regulatory scrutiny of the digital economy as major players report strong second-quarter earnings.

Tencent reported better-than-expected profit of 42.6 billion yuan (US$6.5 billion) for the three months through June against an estimated 34.4 billion yuan, with its fintech outshining gaming in revenue growth.

Revenue jumped 20 percent to 138.3 billion yuan, with a 20 percent increase in sales from mobile games.

Income from fintech and business services increased by 40 percent to 41.9 billion yuan in the second quarter, reflecting increasing digital payment transactions and digitalization of public services and traditional industries.

"We are increasingly deploying our technologies and expertise to help small and medium enterprises, public services, and corporations to collaborate internally, and connect with their users externally, which we believe contributes to the real economy and to society at large," said Chairman and CEO Ma Huateng.

Tencent shares were knocked down more than 8 percent after it announced even stricter measures than the National Press and Publication Administration's guidelines on youth online gaming after state media criticized addictive game-playing.

Tencent said that players under age 16 accounted for 2.6 percent of gaming revenue in China and those under 12 accounted for 0.3 percent in the second quarter.

Tencent President Martin Lau told analysts in a call on Wednesday that it "expects more regulations to be coming" in the short term as the market watchdog seeks to foster long-term sustainable development of Internet economies.

Despite a 23 percent increase in total ad income, he also pointed to a significant drop in advertising spending from education tutoring service providers after Beijing halted after-school tutoring.

NYSE-listed online discount retailer VIPShop reported a 25 percent jump in the second-quarter year-on-year gross merchandising value to 48.1 billion yuan as the number of its active customers surged 32 percent to 51.1 million.

"We believe that our ability to offer differentiated selections of quality products to our customers at competitive prices will further solidify our leading position in China's discount retail market," said Chairman and Chief Executive Officer Eric Shen.

Income in the second quarter increased 22.8 percent to 29.6 billion yuan. The company aims to beef up marketing initiatives to boost average revenue per user.

Shen said he remains upbeat about the fourth quarter business outlook, a peak season for online shopping.

Challenges in physical apparel stores will push up online sales, offering positive business perspectives, he told the earnings conference call on Wednesday.

The company is seeking to enhance its proportion of frequent shoppers by attracting new buyers from all geographical regions and different tiers of cities.

It has moved to expand product offerings to include personal care beyond clothes and apparel. Sales from VIPShop contributed over 10 percent of total sales in the first half of Winona products, a leading domestic skincare brand targeting skin allergies.

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