Tencent smashed analysts’ expectations with a 65 per cent rise in net income to Rmb23.97bn ($3.81bn) in the first three months of the year, powered by gaming and online ads.

However, the cost of its competition with rival Alibaba was laid bare by a 3 percentage point drop in operating margins, after stripping out the impact of acquisitions and certain non-cash items.

Tencent has built on its gaming and social media roots to evolve into a tech conglomerate with a big presence in retail, finance and entertainment. It has done so via organic growth and acquisitions, and has wooed customers with generous subsidies — particularly in payments — which has dented margins. The group, whose market value has dropped more than $70bn from its January high, said operating profit had risen 59 per cent year on year to Rmb30.69bn in the quarter to the end of March.