HONG KONG • Tencent Holdings is expected to report its fastest pace of revenue growth since 2018 when it unveils quarterly results tomorrow, and investors will look to executives for reassurances it can sustain that pace of top-line expansion.

The WeChat operator picked up millions of new gamers during the global coronavirus outbreak, as the quest for entertainment among millions confined to their homes translated into a big boost for Tencent's marquee games, Honour of Kings and Peacekeeper Elite.

That helped the Chinese corporate giant gain US$25 billion (S$36 billion) of market value up to March 5, before a global market rout torpedoed the stock.

But Tencent's first-quarter outlook may be less clear-cut than anticipated. While the bread-and-butter Peacekeeper Elite showed strong growth in revenue last month, sales from other major games dwindled sequentially and overall revenue actually fell, according to Sensor Tower data.

Tencent's social and video ad businesses are also expected to take a hit this quarter when merchants and brands tighten their budgets.

And any blow to China's economy will of course pummel the consumer and marketing spending Tencent relies on.

According to Bloomberg analysts Vey-Sern Ling and Tiffany Tan, China's virus-prolonged Chinese New Year holiday and increased time at home failed to lift Tencent's February sales sequentially as gamers returned to work mid-month. Sales fell 14 per cent, dragged by weak performances by major games. But downloads gained as casual gamers came back online.

To be sure, Tencent can rely to an extent on Honour of Kings and Peacekeeper Elite to cushion any economic shocks, while awaiting government approval for the domestic release of potential smashes like Call of Duty Mobile.

Investors also hope many of the first-time users that gravitated towards Tencent's games will remain once the pandemic subsides.

Tencent's stock began climbing last month after the outbreak exposed the dichotomy of the world's second-largest tech economy.

While virtual denizens like Tencent rode a surge in social media and entertainment, companies like Alibaba - with outsized footprints in the material world - struggled to contain the fallout.

The WeChat operator picked up millions of new gamers during the global coronavirus outbreak, as the quest for entertainment among millions confined to their homes translated into a big boost for Tencent's marquee games, Honour of Kings and Peacekeeper Elite.

Tencent owed its gains to people like Mr Huang Sihao who, for almost a month, was glued to his smartphone before going back to work. For as long as seven hours a day, the 28-year-old Shanghai resident hacked and slashed through the virtual battle arena of Honour of Kings - until the game's anti-addiction system booted him. "I had nothing better to do," he said.

Daily active users on the game have surged 7 per cent to two million players on Chinese iOS devices since late January, while users on super-app WeChat have increased by 1.4 million, according to Apptopia data.

Surprise hits included Tencent's mahjong and poker titles, both of which have replaced the real-world versions played among friends and family.

In the longer term, the bigger problem may be ByteDance. The world's largest start-up has been luring users and advertisers away to addictive apps like news aggregator Toutiao and video platform Douyin, TikTok's Chinese twin. Now, ByteDance is trying to diversify its revenue stream into arenas such as paid music services and full-fledged video games, posing a potential threat to Tencent's online content empire.

"With Bytedance's combined user base approaching Tencent's, media buyers aren't just keen to hear what new apps or functions Tencent has in the pipeline, but how it's making digital ad spend go further," said research and strategy manager with consultancy AgencyChina Michael Norris.

BLOOMBERG