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Tencent has reported its Q2 earnings, but this fastest revenue-growing quarter in over a year will not outshine prohibiting order for WeChat.
The U.S. government is continuing to wage an economic war with China and disrupt the activity of companies operated mainly from there. Earlier, the U.S. President Donald Trump administration announced plans to ban the TikTok app on the premise that it is capable of being used to gather data on Americans for use by Beijing. Besides, Trump banned U.S. transactions with TikTok’s owner ByteDance and Tencent (OTCMKTS: TCEHY), the parent company of a popular social media app WeChat, for the next 45 days. Today, Tencent has reported its Q2 earnings, but this fastest revenue-growing quarter in over a year will not outshine prohibiting order for WeChat.
TCEHY stock closed yesterday with at $65.95 with a 1.63% rise.
Tencent Q2 Earnings: Highlights
For the quarter that ended on June 30, total revenues of Tencent totaled 114,883 million yuan, an increase of 29% over the second quarter of 2019. Meanwhile, Refinitiv consensus estimates were 112.72 million yuan. Profit attributable to equity holders was expected to make up 27.56 million yuan. In reality, on a non-IFRS basis, it totaled 30,153 million yuan.
Further, in Q2 2020, WeChat owner Tencent reported a boost in revenues its game sector generated. According to Tencent, online game revenues grew by 40% to 38,288 million yuan. Total smartphone game revenues accounted for 35,988 million yuan and PC client game revenues were 10,912 million yuan for the second quarter of 2020.
Mr. Ma Huateng, Chairman and CEO of Tencent, said:
“Since the beginning of this year, the COVID-19 pandemic has swept the world, disrupting our daily work and life routines. During this challenging time, we utilised our platforms and technologies to help users adapt to the new normal via online tools, to support enterprises in conducting digital upgrades, and to broadly contribute to economic recovery.”
He further added:
“We achieved generally robust operating and financial results in the second quarter, testifying to the diligence of our teams and resilience of our business model. We are committed to investing in talents, technology and platforms in a disciplined manner to embrace the emerging structural opportunities and challenges ahead.”
Last week, Donald Trump called WeChat a “national emergency” and issued executive orders banning U.S. transactions with Tencent for the next 45 days.
“WeChat automatically captures vast swaths of information from its users. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”
The ban makes an already tense relationship between the US and China even worse. The outcome of this trade war depends largely on the results of the 2020 presidential election. If Vice President Joe Biden defeats Trump, he has pledged to reverse orders like the immigration ban. He could take a different stance on Chinese social media apps as well.