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Covid and Regulatory Scrutiny are Destroying Tencent

Tencent profits halve, revenue stabilizes due to COVID-19 outbreak, government scrutiny

China’s Tencent announced a halving of its quarterly profit with flat revenue without any growth in the first quarter compared to the same period a year ago. The stock exchange in 2004 to follow in the footsteps of its competitors, Alibaba and JD. Read more [JD Beats Expectations Despite Slowest Quarterly Growth] and [Alibaba Reveal Slowest Quarterly Growth Since its IPO].

The company that operates the messaging application WeChat, which is the largest video game company in the world, said that advertising sales fell by 18% during the first quarter ending on March 31, after recording a decline of 13% during the previous quarter from October to December. The quarantine and general closure due to the resurgence of the Covid-19 outbreak damaged the morale of advertisers, in addition to the fact that Tencent’s advertising business received a severe blow from its competitors, especially ByteDance, which owns the TikTok application. Read more [Tencent’s Revenue Records Slowest Growth In The 4Q].

The Shenzhen-based company has lost more than half of its market value since its peak in February 2021 due to the Beijing government’s fierce regulatory campaign to crack down on big Internet companies, but despite this, Tencent remains the most expensive company in China.

The company indicated in its latest statement that regulatory practices may begin to recede soon, but the Covid outbreak appears to be a greater challenge, especially in Shanghai, the economic and financial hub that drives China. Read more [Chinese Video Game Companies Rose After Regulatory Approvals].

Tencent’s domestic gaming revenue declined by 1% during the first quarter, while global revenue from the same division grew by 4%, and the company’s business revenue growth in financial technology and services slowed by 10% during the first quarter, after its growth was up to 47% during the same quarter. a year ago.

Total revenue reached 135.5 billion yuan ($20 billion) during the quarter, which is exactly the same as the revenue of the first quarter a year ago without any positive growth, failing to meet analyst expectations of 141 billion yuan, but the worrying thing was that its profits plunged by 51%.

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