League of Legends parent company Tencent makes $1 billion in profit last quarter

Surprise! The company that owns League of Legends, half of the developer that makes the Unreal Engine, and a portion of Call of Duty publisher Activision is making a lot of money.

The Chinese investment and online-gaming giant Tencent reported the results of its fiscal first quarter today. The company generated $2.99 billion in revenue from all of its products. That is up 36 percent year-over-year. More than a third of that cash, $1.05 billion, is profit, which is up 60 percent over the same period in 2013. Tencent also owns League of Legends developer Riot Games, nearly half of Unreal Tournament studio Epic, and a minority stake in Call of Duty publisher Activision.

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Tencent also owns and operates one of China’s most-important app-distribution and chatting networks. Its WeChat and Weixin social-networking services have more than 396 million monthly active users, and its QQ and Qzone chat and app-distribution networks have over 848 million.

“During the first quarter of 2014, we substantially expanded our mobile ecosystem, providing new services to users, generating value for our business partners, and enhancing our own financial performance,” Tencent chief executive Ma Huateng said in a statement. “Our smartphone games business achieved clear market leadership, allowing us to achieve 29 percent year-on-year growth in our non-GAAP net income while funding significant investments in various strategic initiatives.”

A huge portion of Tencent’s revenues is directly attributable to its online-game business. That division generated $1.67 billion in consumer spending. That’s up 23 percent over the previous quarter, and smartphone games installed through the company’s QQ services made up the bulk of that growth. Huateng also acknowledged the continuing strength of its PC games business, which is massive in China.

Gamers spent around $13 billion in the Asian country last year, and $8.7 billion of that was PC-based online games that Tencent specializes in. Those include massive successes like League of Legends and the shooter Crossfire, which made nearly $1 billion on its own last year.

China is also quickly adopting smartphones. The nation spent $1.8 billion on mobile apps last year, and that’s expected to grow to more than $3 billion this year.

Tencent is well positioned to benefit from China’s rise as a gaming power. The company is also currently working with Activision to debut Call of Duty: Online, a free-to-play version of the popular shooter, in China later this year.

The rest of Tencent’s revenue came from online advertising and e-commerce.

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