Tencent posted its first year-on-year quarterly revenue decline as tighter regulations in China and a resurgence of Covid-19 in the world's second-largest economy hit the tech giant.
Tencent missed revenue and profit forecasts. During the quarter, Tencent faced macroeconomic problems stemming from the resurgence of Covid in China and subsequent shutdowns in major cities, including the financial metropolis of Shanghai.
China's economy grew just 0.4% in the second quarter, missing analysts' expectations. This has impacted the company's fintech, cloud and advertising revenue.
Meanwhile, China's domestic video game industry is also facing challenges due to stricter regulations. Tencent generates about a third of its total revenue from the gaming sector.
Last year, Chinese regulators introduced rules limiting the amount of time children under the age of 18 can play games.
The regulator also froze the approval of new games between July 2021 and April this year. In China, games have to get the green light from regulators before they can be released and monetized.
Analysts at China Renaissance said in a note published last month that Tencent launched just three mobile games in the second quarter. Tencent has faced several problems in 2022 including a Covid-induced slowdown in the Chinese economy and a more difficult market for games.
Tencent has faced several problems in 2022 including a Covid-induced slowdown in the Chinese economy and a more difficult market for games.
The company said it saw revenue decline in the second quarter from some of its long-running popular games such as PUBG Mobile and Honor of Kings.
Tencent also runs one of the largest mobile payment services in China called WeChat Pay through the messaging app WeChat which has over 1 billion users. The company also has an emerging cloud computing business. Revenue from this segment increased 1% year-on-year to 42.2 billion yuan, slower than the previous quarter.
