Tencent posts first-ever quarterly revenue decline
Published: Aug 18, 2022 01:11 AM
Tencent File photo: Xinhua
Tencent File Photo: Xinhua

Tech giant Tencent reported a revenue of 134.03 billion yuan ($19.78 billion) in the second quarter this year, a decline of 3 percent year-on-year. Analysts said the firm's first ever quarterly revenue drop was a result of the epidemic as well as macroeconomic headwinds, while noting that long-term prospects are still promising as the Chinese economy is set to expand in the next half.

According to its financial report, revenue declined 3 percent to 134.034 billion yuan for the three months ended June 30 from 138.259 billion yuan a year earlier.

Net profit was 18.6 billion yuan, a year-on-year decrease of 56 percent. While on a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items, net profit in the second quarter was 28.139 billion yuan, down 17.2 percent year-on-year, and the decline narrowed for two consecutive quarters.

"During the second quarter, we actively exited non-core businesses, tightened our marketing spending, and trimmed operating expenses, enabling us to sequentially increase our non-IFRS earnings, despite difficult revenue conditions," said Ma Huateng, chairman and CEO of Tencent.

"The result is actually in line with industry expectations as its performance would have been directly affected by the situation of the Chinese macro economy," Liu Dingding, a veteran industry analyst, told the Global Times on Wednesday. "The epidemic dealt a heavy blow to major cities across the country in the second quarter of the year," Liu noted.

Among Tencent's main business segments, half of its revenue is closely related to the real economy. In the second quarter, the revenue of the financial technology and enterprise services segment was 42.208 billion yuan, accounting for 32 percent of the total.

As the country's internet industry is experiencing transformation as a whole, it's likely that Tencent will experience a slower growth pace for a certain period of time, Liu cautioned. "But as long as the fundamentals of the Chinese economy remain solid, we can bet on long-term development for the tech giant."

"Looking forward, we will focus on enhancing the efficiency of our businesses and launching new revenue initiatives, including in-feed advertisements in our popular video accounts, while continuing to drive innovation through R&D. We generate approximately half of our revenues from fintech and business services as well as online advertising that directly contribute to, and benefit from, overall economic activity, which should position us for revenue growth as China's economy expands," Ma said.

Martin Lau, president of Tencent, said during an earnings call with analysts on Wednesday that the regulatory environment in China is "progressing from rectification to normalization," which should "bode well for the industry over time." He said in the gaming sector, regulation is trending in a "more positive" direction, according to a report from CNBC.

Second-quarter domestic games revenue fell 1 percent year-on-year to 31.8 billion yuan, while international games revenue fell by the same percentage amount to 10.7 billion yuan, according to the company.