Tencent has now become China's most valuable technology company after surpassing e-commerce giant Alibaba, according to a report by CNBC.
Tencent's market capitalization was placed at 1.9103 trillion Hong Kong dollars, or around $246.35 billion, compared with Alibaba's, whose market capitalization reached only $242.04 billion, based on the data compiled by spreadbettor IG.
Tencent said on Wednesday, Aug. 17, that it has improved forecasts for its second quarter earnings as mobile gaming and advertising show strong growth.
The company beat the forecast of a Thomson Reuters poll of analysts which predicted a revenue of 33.2 billion yuan as the total revenue for the second quarter reached 35.69 billion ($5.38 billion), an increase of 52 percent on-year.
Tencent's WeChat/Weixin platform's monthly active users also jumped by 34 percent on year to 806 million, the report said.
On Thursday, Aug. 18, Tencent shares went up 5.08 percent during the morning trade, which drove its market capitalization ahead of Alibaba's. The company is also hailed as the best performing stock on Hong Kong's Seng index, an increase of 26.56 percent, on-year to date basis.
As Tencent's earnings went up, analysts offered price increases on shares, citing the company's dominance of the online and mobile gaming sector.
Majority of the company's revenue in the second quarter could be attributed to online gaming, which gre 32 percent on-year to 17.124 billion yuan. This was particularly driven by smartphone games, which revenue more than double to 9.6 billion yuan for the quarter.
Tencent strengthened its position in June when it acquired majority stake in Finnish game-maker Supercell, the producer of popular titles such as Clash of Clans and Clash Royale.
"Tencent's mobile game pipeline in second half 2016 and 2017 looks solid to us," analysts John Choi and Alex Liu from Daiwa Capital Markets, said. "We see revenue upside from the monetisation of Supercell's vast China user base and the introduction of new genre games (such as location-based games)."
Although Tencent has overtaken Alibaba in market capitalization, it did not mean that they are exempt from competition with other players such as Baidu.
"Tencent and Alibaba's fundamentals are much better than Baidu, in terms of the platform business model and also the monetization momentum currently," Marie Sun, a senior equity analyst at Morningstar, told CNBC.
An Alibaba spokesperson however told CNBC by email that stock performance will not affect the company's strategy.
"Alibaba has proven its unique competitive position and a strong foundation for sustainable growth," the spokesperson said.
The e-commerce giant posted a 59 percent increase in quarterly revenue last week.