Tencent Posts Biggest Profit Decline Since 2004

Chinese gaming and social media giant Tencent Holdings reported virtually no growth in first-quarterly revenue, its worst ever such performance, and also missed market estimates as China's economic slowdown and a freeze on new game licences weighed on its business.

Revenue totalled CNY 135.5 billion (roughly Rs. 1,55,804) in the quarter ended March, versus CNY 135.3 billion (roughly Rs. 1,55,655 crore) in the same quarter last year, and below an average estimate of CNY 141 billion (roughly Rs. 1,62,200 crore) from 16 analysts, according to Refinitiv.

Tencent, which makes much of its money by developing games such as Honour of Kings and Call of Duty Mobile, said profit attributable to equity holders of the company for the quarter also fell 51 percent. It marks the biggest profit decline since the company went public in 2004, according to Refinitiv data.

The slowing pace of growth tracks two previous quarters of softening sales. Tencent — China's most valuable company — has seen expansion opportunities clipped by a regulatory crackdown by Beijing to rein in the influence of large internet firms.

The Shenzhen-based tech giant has been impacted by user spending on games normalising after a surge over the past two years. Meanwhile, a COVID-19 resurgence in China has also dampened payment activities.

Last month, Tencent said it will shut down a service that allowed Chinese gamers to access overseas platforms to play unapproved foreign games, in a sign of tightening compliance as Chinese regulators more closely scrutinize the industry.

The country's largest social and gaming firm said it will update its games speed booster mobile and desktop apps to new versions on May 31 that would only support games operating in China. The new versions will no longer allow users to access foreign games.

© Thomson Reuters 2022