Tencent missed both revenue and profit forecasts posting a decline of 3% year on year.
Chinese tech giant, Tencent, posted its first-ever quarterly year-on-year revenue decline in the face of stricter regulations for gaming in China and a resurgence of Covid-19.
The gaming giant and owner of the WeChat messaging platform has reported double-digit growth nearly every quarter since its IPO in 2004. The company announced that its quarterly revenues dropped 3% from a year earlier as China’s slowing economy hurt its online-advertising revenue, while its game business, which fell 1% from the previous year, struggled under tighter regulations.
With advertisers remaining cautious about spending, Tencent reported 18.6 billion yuan ($2.74 billion) in ad revenue for Q2–down by 18%.
On an earnings call with analysts Tencent President, Martin Lau, talked about the regulatory environment in China as “progressing from rectification to normalization,” which he felt should “bode well for the industry over time,” adding that in the gaming sector, regulation is heading in a “more positive” direction. He expects Tencent to receive game licenses from regulators in the “near future”.
“The result is actually in line with industry expectations as its performance would have been directly affected by the situation of the Chinese macro economy,” Liu Dingding, a veteran industry analyst, told the Global Times. “The epidemic dealt a heavy blow to major cities across the country in the second quarter of the year,”
Tencent’s earnings report comes after eCommerce giant Alibaba reported earlier this month flat quarterly revenue growth for the first time in its history.