TENCENT Holdings, the world’s largest gaming company by revenue, warned Wednesday of a difficult economic environment even as it reported a better-than-expected 35 percent jump in quarterly profit.

Growth in the company’s gaming business resumed in the second quarter after a long regulatory freeze in China and its fintech operations also generated sharply higher revenues.

However, Tencent saw a slowdown in online advertising revenue growth amid a slowing Chinese economy and Sino-U.S. trade tensions, and expects conditions to remain tough.

“Our assumption is that the macro environment will remain difficult for the rest of the year and that the situation of the heavy supply of advertising inventory will continue for the rest of the year and potentially into next year,” chief strategy officer James Mitchell said.

Tencent made 24.14 billion yuan (US$3.4 billion) in net profit for the April-June quarter, beating an average estimate of 20.74 billion yuan from 13 analysts polled by Refinitiv.

Smartphone gaming revenue rose 26 percent to 22.2 billion yuan, helped by major titles including “Honour of Kings” and “Perfect World Mobile” as well as new releases. Desktop games revenue dropped 9 percent to 11.7 billion yuan.

“We are quite happy with the recovery of the smartphone games,” Tencent’s president Martin Lau said, referring to a sequential rise in the segment’s revenue even though the second quarter is traditionally weaker. Tencent launched 10 new games in the June quarter. (SD-Agencies)