Chinese tech giant Tencent reported its slowest revenue growth on record after being hit by China’s crackdown on tech companies and tough Covid-19 restrictions.
The company’s revenue was broadly flat in the three months to March, while net income fell 51 percent year-on-year to Rmb 23 billion (US$3.5 billion), missing analyst estimates.
Tencent’s results come a day after China’s top economy official met with dozens of executives and industry experts. “Support” promised for tech companies amid a deepening economic downturn.
While the lockdown in Shanghai didn’t officially start until the end of March, Tencent said on Wednesday that its fintech earnings started feeling the effects of the tough restrictions from mid-March.
“The resurgence of Covid-19 in several cities in China. . . has negatively impacted payment volume growth in categories like transportation, hospitality and apparel,” Tencent said.
Tencent, China’s most valuable company, said revenue from domestic games, a key segment for the group, fell 1 percent year on year to Rmb 33 billion, while revenue from online advertising fell 18 percent to Rmb 18 billion fell.
“Revenues from online advertising fell . . . This reflects weak demand from advertiser categories such as education, internet services and e-commerce,” Tencent said.
The company blamed “direct and indirect effects” of last year’s government move to limit children to about play for three hours a week for the hit to domestic gaming revenue.
Facing regulatory challenges in the local area, Tencent has sought to expand overseas over the past year and has increased its numbers Investments in foreign start-ups.
However, the company said it had generated disappointing revenue from some of its international games such as PUBG Mobile, with global gaming business profits falling 20 percent to Rmb 10.6 billion in the quarter.
Bo Pei, a tech analyst at US Tiger Securities, said Tencent missed both revenue and earnings estimates for the quarter, mainly due to economic weakness and pandemic lockdowns in China.
“Considering that lockdowns began in mid-March and are still in effect in some cities, including Shanghai, Tencent’s second-quarter prospects are even more challenging,” he added.
Tencent’s revenue growth hit by tech crackdown and Covid curbs Source link Tencent’s revenue growth hit by tech crackdown and Covid curbs