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Two of Asia’s high-flying tech titans, Alibaba and Tencent, reported earnings last week that significantly outpaced analyst expectations.

Tencent Holdings (700 HK)

The Chinese gaming and messaging giant reported revenue of 56.6 billion yuan (US$8.47 billion), up 59% from the year-ago quarter. Analysts had forecast revenue of just US$7.79 billion. Tencent earned 18.2 billion yuan ($2.7 billion) in operating profit, up 70%. That was 30% above the Bloomberg profit estimate of 13.5 billion yuan. Drivers included online games and messaging up 43% to 36.8 billion yuan and online advertising which surged 55% Y/Y.

Tencent is China's dominant provider of online and mobile games and also holds one of the largest messaging platforms worldwide with its WeChat and QQ offerings. WeChat now has 963 million monthly active users, up 19.5% vs. a year earlier. Tencent also owns Riot Games, creator of video game "League of Legends," as well as Supercell, creator of "Clash of Clans."

Alibaba (BABA US)

China's top e-commerce firm, also significantly beat analysts’ estimates with a 56 percent rise in first-quarter revenue, driven by growth in online sales which make up some 86% of its business. Alibaba's revenue rose to 50.1 billion yuan ($7.51 billion) for the three months ended June 30, compared with analysts' average estimate of 47.7 billion yuan. The company’s results show that Alibaba is benefiting from more and more Chinese buying an increasing proportion of everything from food to clothing to luxury items online.

Alibaba's stock is up by over 81% year to date and Tencent has gained (a not insignificant) 54.9% in AUD to 23 Aug 2017.

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Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances. Past performance is not a reliable indicator of future performance.

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