August 9, 2022
Tencent, driven by China’s gaming crackdown, records lowest profit growth in two years


Chinese gaming and social media giant Tencent on Wednesday reported its slowest quarterly profit growth in two years, hurt by a gaming crackdown, and said the outlook for the advertising sector will remain weak next year.

The company said in a statement that net profit for the three months during September rose 3 per cent to CNY 39.5 billion (approximately Rs 45,962 crore). According to Refinitiv data, it beat the expectations of analysts who were predicting a decline.

Data from Refinitiv showed revenue climbed 13 per cent to CNY 142.4 billion (about Rs 1,65,715 crore), slightly lower than expected, and the slowest quarterly growth since the company went public in 2004.

China’s largest company by market value has been hit by new limits on the amount of time it takes for minors to play video games. The government has not approved any new games since August.

Beijing’s year-long crackdown on its one-time freewheeling Internet industry has punished well-known companies for engaging in what were previously considered routine market practices, while wiping billions of dollars from their market values.

“During the third quarter, the Internet industry, including the domestic game industry and some advertiser categories, adapted to new regulatory and macroeconomic developments,” Tencent president and CEO Pony Ma said in a statement.

“We are actively adapting to the new regulatory environment, which we believe should contribute to a more sustainable growth path for the industry,” he said.

The owner of games like Honor of Kings and PUBG Mobile said in a statement that the sales of mobile games have increased by 9 percent.

Tencent said minors accounted for 0.7 percent of home game time in September this year, down from 6.4 percent in September 2020 after the government’s new limit came into force earlier that month.

Regulatory action has also affected educational centers and the medical beauty industry and curbed the appetite of such industries for advertising.

Tencent said its ad revenue growth rate slowed, citing such regulatory factors as well as macro challenges. It said the advertising pricing industry is expected to remain soft for several quarters, but said the industry should adjust next year, it said.

Tencent has lost about 18 percent of its market cap this year and 9 percent in the broader market.

© Thomson Reuters 2021


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