Despite the aggressive investment, Tencent’s value drops by a total of US$78 billion. The analysts also see it being the worst margin since 2003. But let’s not jump to any conclusions yet.
A report from Bloomberg reveals Tencent’s quarterly financial report. Inside the report highlights the Chinese giant’s finance in investments. Analysts are concerned that the company is not able to bring in the money they invested so far.
Adding on, the gross margin in the latest period is expected to drop below 47% for the first time since 2003.
Despite the fact that Tencent’s mobile gaming revenue doubles, it still faces a loss. One of the reasons is due to the loss they suffered in the PC gaming category.
The reason why they drop so low obviously is that of the amount of investment. One of the biggest investments that Tencent made was a US$632 million and US$462 million in games streaming services Douyu and Huya.
Additionally, they also invested US$476 million to game developers Shanda Games. Not to mention the investments on mobile developers Kakao Games and Ourpalm, with Kakao Games getting US$130 million and Ourpalm with US$72 million.
Not just the gaming industry, the Chinese publishing giant also dedicates themselves to compete with e-commerce giant, Alibaba. Other sectors include entertainment, payments, cloud computing, and also retail. These sectors are most notably known for Alibaba’s sectors.
Tencent’s retail deals this year include a US$5.1 billion investment to back up Carrefour SA’s China unit through Wamda Commercial Properties.
Tencent dominates game deals as it galloped US$22 billion for the past year. This includes investment and mergers and acquisitions (M&A) activities.
The company also just recently signed a cultural collaboration with the UK’s Department for International Trade.
Will Tencent’s huge investment pay off in the long run? With what’s been going on, it seems that the company will eventually get their money back and make a profit. But, patience and strategy are the keys.
Edited by Devi