Tencent posts no growth in Q1 revenue, misses estimates

CHINA’S Tencent posted a quarterly profit that halved from a year ago and recorded no revenue growth, its worst performance since it went public, and warned that advertisers in consumer, eCommerce and travel businesses have slashed spending.

Revenue totalled 135.5 billion yuan (S$27.8 billion) in the quarter ended March, versus 135.3 billion yuan in the same quarter last year, and below an average estimate of 141 billion yuan from 16 analysts, according to Refinitiv.

Tencent, operator of the WeChat messaging platform and the world’s largest video game company, said profit attributable to equity holders of the company for the quarter fell 51 per cent. It was the biggest profit decline since the company went public in 2004, according to Refinitiv data.

Tencent’s market value has more than halved from its peak of US$930 billion in February 2021 to about US$451 billion now, but it remains the country’s most valuable company.

The abrupt halt in revenue growth follows two previous quarters of softening sales. Tencent has seen its expansion opportunities clipped by a regulatory crackdown by Beijing to rein the influence of the country’s largest 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 resurgence in China has also dampened payment activities.

Advertising sales have declined sharply, falling 18 per cent in the first quarter, following a 13 per cent drop in the October-December period as increased competition from rivals including TikTok owner ByteDance and Covid-19 lockdowns hit advertising appetite.

Beijing’s 8-month freeze on new game licences also dealt a blow to Tencent, which makes much of its money by developing games such as Honour of Kings and Call of Duty Mobile.

China resumed issuing licenses in April but the latest batch of new licenses did not include games from Tencent, and Beijing had yet to issue a new batch of game licenses this month.

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Tencent’s domestic game revenue dropped 1 per cent in the first quarter while its international game revenue saw a 4 per cent rise. With Chinese regulators releasing draconian measures to limit minors from playing video games and cracking down on aggressive monetization features, Tencent has turned to overseas markets for growth.

China’s economic slowdown is also curbing demand in the company’s fintech and business services segment, with revenue growth slowing to 10 per cent in the first quarter from 47 per cent in the first quarter last year. REUTERS