Is Tencent's Rapid Growth Starting to Plateau?

Although Tencent’s revenues and profits in 2018 matched market expectations,Treat video games as brand names (capitalize, roman, no quotation marks) shareholders in the United States and Hong Kong divested stocks instantly after Tencent published its annual report. This was likely a reaction to a net profit drop that Tencent reported for the fourth quarter, which caused concerns that the company’s growth was slowing even though increased investments had caused the dip. And yet it sparked the question: How solid are Tencent’s main business divisions and how profitable are they going to be in the future?

Tencent Games has always been the main business and an unfailing source of profits for the company. In 2018, revenue from games came to ¥77.8 billion ($11.2 billion). But since 2016, the Chinese government’s tightening rein on the gaming sector has stunted the growth of many gaming enterprises. Tencent still hasn’t been able to cash in on its latest game, PlayerUnknown’s Battlegrounds, because regulatory authorities haven’t issued a version number to...