Chinese tech giant Tencent’s revenue fell 2 percent year on year in the third quarter, the company said Wednesday, as Beijing’s regulatory crackdown on video games and the tech sector hit earnings.
The Hong Kong-listed company, which is the world’s top video game maker and the owner of popular super-app WeChat, posted revenues of 140 billion yuan ($19 billion) in the third quarter, according to a stock exchange filing.
It is Tencent’s second consecutive quarterly decline in revenue, as the company grapples with tightened regulations.
Tencent said domestic video games in particular saw a 7 percent decrease in the three months ending September 30, “as transitional industry challenges resulted in lower paying user counts”.
Profit attributable to equity holders was up 1 percent in the third quarter, with the company saying it had implemented “business rationalisation and cost efficiency initiatives”.
Tencent said it had cut costs in its cloud service projects and also “more tightly controlled” content costs for online advertising.
It announced in a separate statement Wednesday that it would distribute the majority of its stake in food delivery company Meituan to shareholders.
Tencent said it made the decision because it judged that Meituan had now “attained a robust level of financial strength, industry positioning, and investment returns”.
– Layoffs – Beijing’s widespread crackdown on the tech sector, beginning in late 2020, saw record fines, cancelled IPOs and lengthy investigations into top players.
The crackdown, which was ostensibly intended to reduce monopolistic practices and promote competition between internet platforms, decimated revenues and put further pressure on the stalling economy.
In August, Tencent recorded its first quarterly revenue decline since 2004. Other industry giants have also reported sluggish performance in recent months.
Search engine operator Baidu Inc. posted a five percent year-on-year drop in quarterly revenue in the second quarter, while e-commerce platform JD.com announced its slowest revenue growth so far in the same quarter.
Tencent appeared to have laid off a number of employees in the third quarter, with the company shrinking its payroll by more than 1,800 employees between June and the end of September, according to stock exchange filings.
The results come after China announced a series of lacklustre indicators for the world’s second-largest economy, with authorities scrambling to revive growth.
Many parts of China have faced lockdowns and other Covid-19 restrictions in recent months, disrupting business activity and adding to consumer worries as Beijing tries to stamp out the Omicron variant’s spread under its strict zero-Covid policy.
China last month reported its first decline in exports since the early days of the pandemic, while factory activity and gate prices also fell.
Prices of new homes in China also saw their sharpest decline for seven year in October, amid a property sector debt crisis.
Tencent has increasingly turned to overseas business, particularly in Europe.
The group bought British game studio Sumo for $1.3 billion last year and increased its stake in French studio Ubisoft in September.
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