Tencent Holdings  (TCEHY) posted stronger-than-expected first quarter earnings Wednesday but saw sales missing estimates as video game revenues continued to fall amid a government curb on new game approvals and guidelines for time spent playing each week.

Tencent said net profit for the three months ending in March came in at 27.21 million Chinese yuan ($4 billion), up 16.8% from the same period last year and well ahead of the Street consensus forecast of 19.256 million. Group revenues, Tencent said, rose 16.2% to 85.465 million Chinese yuan, but missed analysts' forecasts of 88.426 million.

Video game revenue, however, fell 1% from last year to 28.5 billion Chinese yuan, with smartphone gaming revenue down 2% to 21.2 billion, due to fewer new games releases linked to a government crackdown on video game addiction.

"On behalf of the Board, I would like to thank our staff and management team for their efforts, dedication and devotion to the Group," said Chairman Ma Huateng. "I would also like to express our sincere gratitude to our shareholders and stakeholders for their unwavering support to the Group."

"We are confident that our commitment to building an ecosystem to enhance our user experience, and the strategic upgrade to step into the Industrial Internet era will create value for our shareholders," Ma added.

Tencent's U.S. listed shares closed at $47.07 each Tuesday, after rising 0.84% on the session to extend their year-to-date gain to around 20%.

Tencent's two main online platforms -- WeChat and Weixin -- saw average user slow to 1.3% from the last quarter but still attracted nearly 1.11 billion users each month and grew 6.9% from the same period last year.

China's gaming industry generates around $38 billion a year in sales, according to estimates, as developers tap into a social media landscape that boasts around 700 million daily users. Government officials, however, are keen to slow the industry's growth, and issued curbs on new game approvals last year and new guidelines for time spent playing each week.

"The use of electronic products for non-learning purposes should not exceed 15 minutes and should not be more than one hour per day," the Education Ministry said in a statement that included advice on taking frequent gaming breaks. The younger the children, "the shorter the time for continuous use of electronic products," the Ministry urged.

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