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Chinese tech giant Tencent has reported a 26% surge in quarterly sales, pushed higher by its online gaming business.

Tencent’s Honor of Kings remained a top-ranked game in China, while PUBG Mobile continued to do well overseas.

Online gaming revenues surged 29% to $6bn (£4.4bn) in the last quarter of 2020 over the same quarter in 2019.

However, the company faces more scrutiny from China’s regulators, who have recently taken a tougher approach to the country’s tech giants.

Tencent's overall revenues rose to $20.5bn in the last quarter of 2020, with a profit of $5.2bn.

Revenues from online advertising increased by 22%, while revenue from its financial technology (fintech) and business services was up 29%.

“We extended our leading position in the consumer internet space with enriched content and innovations across our products, while making notable progress in international expansion, starting with games,” Tencent’s chief executive Ma Huateng said.

Gaming competition

Although the bulk of the company’s gaming revenue still comes from China, Tencent’s international sales increased by 43% compared to 2019.

In addition to the company’s two most popular titles, Peacekeeper Elite and Moonlight Blade Mobile helped fuel sales.

However, Tencent is facing mounting competition from other Chinese tech companies, such as ByteDance, the owner of TikTok, which has made inroads into the gaming business.

ByteDance outbid Tencent last week to acquire Shanghai-based gaming studio Moonton Technology, which is best known for Mobile Legends, a game which is popular in Southeast Asia.

Under pressure

Despite its robust earnings, the company’s share price has taken a battering over the past month.

"Tencent's share price reversal has occurred amid a broader tech rout on the Hang Seng Index and is amplified by the prospect of tougher regulatory scrutiny," said Michael Norris, research and strategy lead at Agency China.

Tencent was among a dozen companies to face fines from China's State Administration for Market Regulation earlier this month for violations of anti-monopoly rules.

E-commerce giant Alibaba has faced the most pressure from China's regulators so far, and investors are nervous that Tencent could be next.

In October, Chinese regulators blocked the share market launch of Alibaba-backed Ant Group, which was tipped to be the year's biggest.

Ant Group operates China’s biggest digital payments service, which competes directly with Tencent’s WeChat Pay.