Tencent Profit Misses Analyst Estimates on R&D Spending

Tencent Holdings Ltd, Asia’s largest Internet company, posted third-quarter profit that missed analyst estimates after boosting spending on mobile development to compete against Alibaba Group Holding Ltd.

Net income rose 20 percent to 3.87 billion yuan ($635 million) from 3.22 billion yuan a year earlier, the Shenzhen, China-based company said in a statement today. That compares with the 4 billion-yuan average profit of seven analyst estimates compiled by Bloomberg.

Tencent boosted research, development and marketing to drive use of games and services including the WeChat instant messaging app as billionaire Chairman Ma Huateng steps up his battle with Alibaba, China’s biggest e-commerce company. The company hired soccer superstar Lionel Messi to promote the app as it tries to add new revenue streams, including charging for emoticons, to monetize the app while keeping it free for access.

“Tencent has spent a lot of money on marketing and sales, including hiring famous people,” Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong, said by phone. “Competition in the industry has tensed up and a lot of other companies are also pushing for online games.”

Revenue rose 34 percent to 15.5 billion yuan from 11.6 billion yuan a year earlier. Online game revenue rose 35 percent to 8.4 billion yuan in the same period.