Chinese tech giant Tencent posted its first drop in quarterly revenue since going public on Wednesday, as the company grapples with China’s economic slowdown, pandemic mess and ongoing scrutiny from regulators. Revenue in the second quarter fell three per cent over the previous year to CNY 134 billion (approximately Rs 1,57,000 crore), while profits fell 56 per cent to CNY 18.6 billion (about Rs 21,800 crore), an earnings statement said. .
Tencent cut 110,715 employees for about 5,500 jobs by the end of June, the first quarterly decline in the workforce since 2014.
“We actively exited non-core businesses, tightened our marketing spending, and reduced operating expenses, which allowed us to sequentially increase our non-IFRS earnings,” the company said in a statement. Helped,” the company said in the statement.
The company said that nearly half of Tencent’s revenue came from fintech and business services as well as online advertising, which would put the company in a position to grow as China’s economy expands.
China has spent months cracking down on the video game industry to fight addiction among children, cutting into profits from giants such as Tencent and its rival NetEase.
Beijing began approving new video games again in April after a hiatus, but no Tencent games were on the list, meaning it must rely on older titles like Honor of Kings for revenue.
Tencent said China’s domestic gaming market was facing “transitional challenges”, while the international market was in a “post-pandemic digestion period” as people began to spend on other avenues of entertainment.
The firm said online advertising revenue declined a record 18 percent year-on-year in the second quarter, reflecting “notable weakness in the Internet services, education and finance sectors.”
Forsyth Barr Asia analyst Willer Chen told Bloomberg News, “Tencent is gearing up for the slowdown in the Chinese tech industry.”
“The company’s performance now depends largely on its progress on cost control and operations optimization.”
tech sector reeling
Tencent is one of the biggest names in China’s tech industry still grappling with Beijing’s regulatory crackdown, which began in late 2020 to target anti-competitive practices and end a decade of freewheeling development. happened.
Regulatory actions have wiped out more than $1 trillion (about Rs 79,43,800 crore) from the country’s tech giant’s combined market value in 2021, according to estimates by Bloomberg News – although Tencent has taken the position of China’s most valuable company. retained the crown.
The latest economic slowdown has further damaged the bottom lines for the biggest firms in the sector, with Alibaba Group reporting flat quarterly revenue growth for the first time this month.
Shares of Tencent in Hong Kong rose less than 0.1 percent ahead of Wednesday’s results announcement.
The announcement comes a day after news that Tencent plans to sell all or most of its $24 billion (about Rs 1,90,600) stake in Chinese food delivery giant Meituan.
Hong Kong-listed shares of Meituan fell more than 10 percent on Tuesday following the news, while Tencent dipped slightly before recovering.
Tencent went public in Hong Kong in 2004 and enjoyed double-digit growth thanks to China’s decades-long internet boom, with the instant messaging app WeChat and its roster of games dominating the market.
Earnings data on the company’s performance prior to its listing on the stock exchange is not publicly available.