A resurgence of Covid-19 in the world's second- largest economy hit the technology giant as it posted its first ever quarterly revenue decline.
In the second quarter, Tencent did better than expected.
Revenue and profit forecasts weren't met by the company. Due to a resurgence of Covid in China and the subsequent lock-ups of major cities, including the financial metropolis of Shanghai, Tencent faced macroeconomic challenges during the quarter. The world's second- largest economy has been disrupted by the "Zero Covid" policy.
The company's revenue was impacted by China's 0.4% GDP growth in the second quarter.
China's domestic video games industry has faced challenges. About a third of the company's revenue comes from gaming.
Chinese regulators introduced a rule last year limiting the amount of time children under the age of 18 could spend playing online games to a maximum of three hours a week.
Between July 2021. and April this year, the approval of new games was frozen. Regulators in China need to approve games before they are released.
According to analysts at China Renaissance, there were only three mobile games launched in the second quarter. The company relies on its popular titles to make money.
International games revenue fell the same percentage as domestic games revenue in the second quarter.
A post-pandemic digestion period was experienced by the international games market. During the height of the Covid outbreak, people turned to gaming for entertainment and companies like NetEase saw a boom. Since countries have re-opened, people are spending less time playing games and it's difficult to compare companies.
The Chinese market is experiencing a similar digestion period due to transitional issues such as fewer big game releases, lower user spending, and the implementation of Minor protection measures.
In the second quarter of this year, the company saw a decrease in revenue from some of its hit games.
There has been a resurgence of Covid in China, which has trickled through to major areas of the company.
The online ad revenue fell in the second quarter.
One of the biggest mobile payment services in China is called WeChat Pay, and it has over 1 billion users. There is a cloud computing business. The revenue from these two is referred to as fintech and business services. The revenue from this segment grew by 1% but was slower than the previous quarter.
Commercial payment activities were temporarily affected in April and May by the COVID-19 resurgence.
Ma said in the earnings release that business should pick up as the Chinese economy recovers.
Half of our revenues come from FinTech and Business Services and Online Advertising that directly contribute to, and benefit from, overall economic activity, which should position us for revenue growth as China's economy expands.
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