Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

China’s Tencent reports first revenue drop as gaming regulations and COVID-19 bite

by Jessica Weisman-Pitts
0 comments
2022 08 17T083734Z 1 LYNXMPEI7G092 RTROPTP 4 TENCENT HOLDINGS DIVESTITURE MEITUAN

By Josh Ye

HONG KONG (Reuters) -China’s Tencent Holdings suffered its first ever quarterly sales fall on Wednesday, hurt by a government clampdown on game approvals and playing time as well as COVID-19 lockdowns and a weakening economy that squeezed ad sales. The contraction marks a nadir for the gaming giant and owner of the WeChat messaging platform which has reported double digit growth almost every quarter since it went public in 2004, as Beijing’s crackdown on big tech companies that began in late 2020 puts the brakes on its expansion. Tencent plans to sell all or a bulk of its $24 billion stake in food delivery firm Meituan to placate domestic regulators, Reuters reported on Tuesday. The company said on Wednesday revenue declined 3% to 134 billion yuan ($19.78 billion) for the three months ended June 30 from 138.3 billion yuan a year earlier. It has fallen for two straight quarters and analysts were anticipating the decline.

“During the second quarter, we actively exited non-core businesses, tightened our marketing spending, and trimmed operating expenses,” Ma Huateng, chairman and CEO of Tencent, said.

Net profit attributable to equity holders tumbled 56% to 18.6 billion yuan, below analysts estimate of 25 billion yuan.

China cut key lending rates on Monday to revive demand as data showed a slowdown in July, indicating the world’s second-largest economy is struggling to shake off the second quarter’s hit to growth from strict COVID restrictions.

E-commerce giant Alibaba Group Holding Ltd, reported earlier this month flat quarterly revenue growth for the first time in its history. Tencent has been reducing holdings in portfolio companies partly to appease the Chinese regulators and partly to book its hefty profits on those bets, according to sources. The Shenzhen-based giant has lost nearly 60% of its market value since it peaked in February 2021 following Beijing’s regulatory crackdown to rein in the influence of large internet firm. However the $373 billion company has held onto its crown as China’s most valuable company.

Revenue from online games, Tencent’s big profit driver, decreased both at home and abroad, with each declining by 1%. Tencent has yet to receive a new game license from Chinese regulators after they temporarily halted approvals.

Its social network services reported a 1% increase in revenue as WeChat earned more from its video content.

“In the short term, that may be its biggest growth driver,” Shawn Yang, manager director of Blue Lotus Capital Advisor said, referring to WeChat video revenue.

Tencent reported 18.6 billion yuan ($2.74 billion) in revenue for ads in the second quarter, down by 18%, as advertisers remain cautious with their budgets, but not as bad as some analysts had anticipated, according to Yang.

Revenue growth from the company’s fintech and business services, slowed to 1% to 42.2 billion yuan ($6.22 billion) due to the impact of lockdowns on business activities.

Shares in Prosus NV, Tencent’s largest shareholder, shed 0.54% in Europe.

“Results are quite weak, but an even worse scenario had been priced into the stock price prior to the earnings,” said Charlie Chai, an analyst with 86Research.

($1 = 6.7756 Chinese yuan renminbi)

(Reporting by Josh Ye; editing by Elaine Hardcastle)