Tencent earnings Tencent earnings Tencent earnings

Our view on Tencent's Q2 earnings

Picture of Peter Garnry
Peter Garnry

Head of Saxo Strats

Tencent has just reported Q2 earnings, missing expectations. Naspers, a Johannesburg-based holding company owning a large stake in Tencent, is down ~6% on the news giving us a good proxy for market reaction.

Tencent shares trade on US exchanges as ADRs, so when US markets open up we will know the true market reaction.

The company had a Q2 net income of CNY 17.9 billion versus an estimated CNY 19.3bn while revenue disappointed with CNY 73.7bn versus forecasts of CNY 77.7bn. These figures are arguably weak and show a slowdown in growth. It’s not our view that this is driven by the ongoing trade war with the US as Tencent is an internet company and as such not constrained as by tariffs unless it slows down the whole economy.

The weaker than expected numbers come on top of Beijing freezing game approvals nationwide due to the government’s intention to increase oversight over gaming and potential addiction among the population. Gaming has been one of the biggest drivers of growth for Tencent so the news will likely cause a repricing of the company over the coming quarters.

Despite weaker than estimated numbers Tencent is still one of the fastest-growing technology companies in the world. Revenue is up 30% year-on-year in Q2 and net income is up 24% y/y. The ongoing theme for Tencent is lower operating margin as the company expands into many new businesses in an attempt to keep up the growth rate as the core business matures.

While Tencent shares are down 30% from the peak, the valuation is still excessive with FY18 EV/EBITDA at 22.6 compared to Facebook’s FY18 EV/EBITDA ratio at 14.4; in other words, Tencent trades at a 57% valuation premium to Facebook.

Naspers share price (five-year, Source: Bloomberg)
Tencent share price (five-year, Source: Bloomberg)


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.