By Yifan Wang

Tencent Holdings Ltd. expressed willingness to cooperate with authorities and played down the potential effect of China's toughening regulatory environment as a boom in videogaming triggered by pandemic lockdowns continued to power the tech company's performance in the latest quarter.

Tencent, the world's biggest videogame company by revenue, said its profit in the September quarter soared 89% to 38.54 billion yuan, equivalent to $5.81 billion, from the same period last year. A sharp rise in valuations of Tencent's investments in electric-car and online-game companies also lifted its quarterly profit.

Revenue rose 29% from a year earlier to 125.45 billion yuan. Both measures beat analysts' estimates, according to FactSet. The latest quarterly performance extended Tencent's surging earnings momentum from the beginning of the year, when homebound consumers turned to digital entertainment and fueled the company's gaming income.

The company said its current strategy "fits very well with the spirit of the regulatory framework" proposed by China's latest draft antimonopoly rules aimed at reining in digital platforms.

"We'll work very constructively with the regulators to ensure our compliance," Tencent President Martin Lau said on an earnings call Thursday.

Beijing has been aggressively tightening its grip over domestic tech giants, as internet companies world-wide draw increasing scrutiny over their market power. Tencent is among China's most influential and omnipresent tech businesses with tentacles reaching across social media, video streaming, digital payments and wealth management.

Chinese regulators on Tuesday released a wide-ranging set of draft antimonopoly rules for online platforms, sending internet stocks including Tencent tumbling as investors feared the new regulations could constrain the industry's rapid growth and squeeze profits. That move followed China's sudden intervention last week to halt the initial public offering of Ant Group Co., as well as the proposal by that country's banking regulator for stricter microlending rules that, when implemented, could subject Tencent's financial-services businesses to higher capital requirements.

Shenzhen-based Tencent is among the first of China's largest tech companies to address investors after the government's signal of stricter oversight. Its shares, which had been trading at record levels, have shed more than 11% in the two trading days after Beijing unveiled the antimonopoly rules.

During an earnings call, Tencent executives said based on their analysis, the company's gaming business -- its largest source of income -- wouldn't be the focus of the latest rules, which give more attention to internet platforms rather than individual products. Tencent has previously addressed scrutiny from Chinese regulators by developing a system to verify the identities of all videogame players and limiting play times for youth.

"Our aspiration is not domination," Chief Strategy Officer James Mitchell said, referring to Tencent's gaming business.

Tencent also played down its growth ambitions for fintech operations, which range from online payments to microlending services, a sector that has been a focus of regulators. "We have a lot of respect for risk management, and that includes deliberately controlling the scale of some of our fintech products," Mr. Lau told analysts and investors.

Tencent doesn't disclose specific earnings figures from financial services. Its fintech and business-services segment accounted for more than a quarter of total revenue in the latest quarter.

In general, Tencent sounded a more cautious and cooperative tone toward authorities. Some observers say recent controversial comments from Alibaba Group Holding Ltd. co-founder Jack Ma, Ant's controlling shareholder, may have led regulators to pull the plug on the fintech firm's blockbuster IPO.

Tencent's attitude is "more in line with the government than Alibaba," said Benjamin Wu, an analyst at research firm Pacific Epoch, referencing the statements from Mr. Ma.

(END) Dow Jones Newswires

11-12-20 1241ET