Tencent, the China tech giant which JSE-listed Prosus and Naspers hold stakes in, yesterday reported its first-ever quarterly sales fall, knocked by government clampdowns on its gaming business and Covid-19 lockdowns.
Tencent said it had shut some unprofitable businesses and promised a return to growth even if the economy stayed weak.
The company said yesterday revenue declined 3 percent to 134 billion yuan (R325 billion) for the three months ended June 30, the second straight quarter showing a fall but in line with analysts expectations.
Net profit attributable to equity holders tumbled 56 percent to 18.6 billion yuan, below analysts’ estimate of 25.3 billion yuan.
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.
Chinese regulators in April lifted a nine-month freeze on gaming licences, but are yet to issue a new licence to Tencent, which has hammered sales at the company that makes much of its money by developing games such as 'Honour of Kings' and 'Call of Duty Mobile'.
Revenue from online games decreased, both at home and abroad, by 1 percent.
Tencent president Martin Lau noted on a post-earnings call though, that China had issued no new regulation this year that was materially detrimental to the industry.
The company had shuttered non-core businesses in areas such as online education, e-commerce and game live-streaming, rationalised under-performing businesses, and significantly cut marketing costs, Lau said.
Despite losing nearly 60 percent of its market value since a peak in February 2021, Tencent's $373bn market value still makes it China's most valuable company.
- Reuters