Tencent posts revenue decline in Q2 2022

Strict regulations at home and resurgence of Covid-19 hit the company hard.
Tencent's logo side by side with a report image

The Chinese technology, social media and video games giant Tencent announced Q2 2022 financial results, posting a decline year-over-year Tencent faced multiple challenges during this quarter, especially at home in China, and the climate proved tough even for a giant like

Tencent’s revenue fell 3% year-over-year (and 1% quarter-over-quarter), down to 134 billion Chinese yuan ($19.78 billion) and gross profit was down to 58 billion Chinese yuan ($8.5 billion) seeing an 8% decline year-over-year.

The Chinese tech giant’s non-IFRS operating profit also fell by 14% compared to the last year and hit 37 billion Chinese yuan ($5.45 billion). The company’s non-IFRS net profit attributable to equity holders was 28 billion Chinese yuan ($4.1 billion), down 17% year-over-year.

According to the report, in addition to missing revenue forecasts, Tencent also missed profits forecasts. This was, however, expected as Tencent’s attempts at getting licenses for new games were shut down by China’s gaming regulator NPPA. China’s strict regulations affected the company in more than just one way. Tencent had to shut down its NFT platform Huanhe due to the Chinese government’s strict measures and it also pulled the plug on WeGame, its mobile gaming platform.

Tencent’s President Martin Lau said the company reduced the costs and is focused on stabilizing its earnings. The experienced businessman also added the following bit about the strict regulations and seemed hopeful for the future.

“We believe that the regulatory environment in China is progressing from rectification to normalization gradually, which should bode well for the industry over time. Specifically, the platform economy, we saw recent regulatory direction trending more positive and supportive, supporting well-regulated healthy and sustainable development of the industry.”

Lau then talked about another major challenge the company has been facing; the resurgence of Covid-19. He said:

“Secondly, several of our businesses were adversely affected by COVID-19 resurgence and economic deceleration, but are significantly geared toward a future economic upturn”

Tencent’s gaming revenues fell both in China and worldwide

Honor-of-the-Kings-the-worlds-highest-grossing-mobile (1)

Tencent’s gaming division reported a 1% decrease in revenue year-over-year, both at home and across the world. Tencent is still strong at home, however, being frozen by NPPA makes things problematic for the gaming giant.

In China, Tencent brought in 38.1 billion yuan ($4.5 billion), meanwhile, the gaming entity reported 10.7 billion yuan ($1.58 billion) worldwide. James Mitchell, Tencent’s CSO, believes the decline in gaming revenue is mainly due to international games experiencing a digestion period, and says Tencent is using the current situation to better its technical capabilities and sustain player engagement.

Honor of Kings and PUBG Mobile continue to rake in billions per month and top the revenue charts, and both games also do well in terms of monthly downloads per Sensor Tower. GSD’s extensive report that covers the European gaming market also suggests sales in Europe were down by 38% in July 2022.

The company is also investing in the gaming hardware space; earlier this month Tencent and Logitech announced a partnership to make a cloud-based handheld gaming device. However, this device won’t be consumer-ready any time soon.

Tencent is also rumored to acquire the majority stakes in Ubisoft, but neither party commented on the topic yet.

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