China’s Tencent reported disappointing profits in the fourth quarter on the back of surging costs but saw emerging businesses pick up steam as it plots to diversify amid slackening gaming revenues.
Net profit for the quarter slid 32 percent to 14.2 billion yuan ($2.1 billion), behind analysts’ forecast of 18.3 billion yuan. The decrease was due to one-off expenses related to its portfolio companies and investments in non-gaming segments like video content and financial technology.
Excluding non-cash items and M&A deals, Tencent’s net profit from the period rose 13 percent to 19.7 billion yuan ($2.88 billion). The company has to date invested in more than 700 companies, 100 of which are valued over $1 billion each and 60 of which have gone public.
Quarterly revenue edged up 28 percent to 84.9 billion yuan ($12.4 billion) beating expectations.
The Hong Kong-listed company is best known for its billion-user WeChat messenger but had for years relied heavily on a high-margin gaming business. That was until a months-long freeze on games approvals last year that delayed monetization for new titles, spurring a major reorg in the firm to put more focus on enterprise services, including cloud computing and financial technology.
Tencent has received approvals for eight games since China resumed the licensing process, although its blockbusters PlayerUnknown Battlegrounds and Fortnite have yet to get the green light. The firm also warned of a “sizeable backlog” for license applications in the industry, which means its “scheduled game releases will initially be slower than in some prior years.”