It may be an inevitable part of any business but that doesn’t make it any easier to handle. Still, the news that Tencent suffered its first quarterly revenue decline probably came as a bit of a surprise to some.
The China-based gaming giant has encountered some hurdles this past quarter, with fewer game approvals than they had anticipated. With new [Chinese] government regulations on video game playing time and an overall weak economy, it truly has not been easy going for the WeChat messaging platform owner. Add to this sustained complications from Covid-19 lockdowns, and it the situation becomes a bit more clear.
Still, any kind of contraction is a bit of a shock for a company that had consistently posted double-digit growth across nearly every quarter since their IPO in 2004. But China’s 2020 big tech crackdown has slowed any kind of expansion for companies like Tencent.
Specifically, the Shenzhen-based firm revealed its revenue fell by 3 percent, to 134 billion yuan (roughly $19.78 billion USD), for the quarter ending June 30. This is down from 138.8 billion yuan since the same period last year.
Tencent CEO Ma Huateng attempted to explain, “During the second quarter, we actively exited non-core businesses, tightened our marketing spending, and trimmed operating expenses.”
This strategy includes a reduction in holdings in their portfolio companies, mostly as an attempt to appease strict Chinese regulators. On that note, Tencent shed upwards of 60 percent of its market value since hitting a peak in February of last year as Beijing regulators increased their tech throttling efforts. Despite that, the $373 billion company maintained its lead as the most valuable company in China.
Online game revenue may be Tencent’s biggest profit driver, but those numbers declined by 1 perent both in China and foreign markets. Their social network volume did increase by 1 percent, specifically earning more from advertising related to video content.
Ma goes on to say, “We generate approximately half of our revenues from FinTech and Business Services as well as Online Advertising that directly contributes to, and benefit from, overall economic activity, which should position us for revenue growth as China’s economy expands.”
