Affected by the epidemic and economic weakness, China’s Tencent Q2 financial report shows that its net profit has fallen by 17%

WASHINGTON — 

Chinese internet technology giant Tencent announced on Wednesday (August 17) its second-quarter earnings report for this year, as the government’s enforcement of game review and minor protection measures tightened game play time, as well as a rebound in the epidemic and a weakening economy that led to the advertising business. The company’s second-quarter sales fell sharply for the first time.

Tencent has seen double-digit sales growth in nearly every quarter since it went public in 2004. Tencent’s expansion will only be curbed after the Chinese government begins to clean up big tech companies in 2020. Reuters reported that Wednesday’s earnings release arguably marked Tencent’s darkest hour.

Reuters reported on Tuesday that Tencent was planning to sell all or part of its US$24 billion stake in Meituan to appease Chinese regulators.

According to the financial report data, Tencent’s revenue in the second quarter was 134 billion yuan (about 19.78 billion US dollars), a year-on-year decrease of 3%; under the international financial reporting standards, its net profit was 18.6 billion yuan, a year-on-year decrease of 56%, also significantly lower than Analysts originally estimated 25 billion yuan; under non-IFRS, net profit was 28.1 billion yuan, down 17% year-on-year, which is also the second consecutive quarter of decline, although it was a slight decrease from the 23% decline in the first quarter. narrow.

“We aggressively exited non-core industries in the second quarter, tightened our marketing expenses, and also cut operating expenses,” said Ma Huateng, Tencent’s chairman and chief executive.

China’s economy slowed more than expected in July due to the rebound of the epidemic and lockdown measures in many places, with factory activity and retail trade both contracting. In order to stimulate demand, the People’s Bank of China bucked the trend and announced on Monday that it would cut the winning bid rates for medium-term lending facility (MLF) operations and open market reverse repurchase operations (OMO) by 10 basis points, to 2.75% and 2.00%, respectively. The central bank also announced that it will carry out 400 billion yuan MLF operations this month, which is lower than the 600 billion yuan MLF that is about to expire.

Chinese e-commerce giant Alibaba announced earlier this month that the company’s second-quarter revenue was only 205.555 billion yuan, the first year-on-year flat, and its net profit was 20.298 billion yuan, down 53% year-on-year; net profit attributable to ordinary shareholders Profit was 22.739 billion yuan, a year-on-year decrease of 50%.

Tencent, headquartered in Shenzhen, Guangdong province, has plunged nearly 60% from its February 2021 peak since Chinese regulators began cracking down on the influence of big internet companies. But it still holds the top spot on the list of China’s most valuable companies with a market value of $373 billion.

As Tencent’s largest profit source, revenue from online games has been on a downward trend both at home and abroad, with a drop of 1% each. Tencent has yet to obtain a license for any new game since China’s regulators suspended reviewing applications for new game licenses.

Tencent’s online advertising business revenue in the second quarter fell by 18.6 billion yuan year-on-year, a drop of 18%; of which social and other advertising revenue fell 17% to 16.1 billion yuan, and media advertising revenue fell 25% to 2.5 billion yuan.

In terms of communication and social networking, the total number of WeChat users reached 1.299 billion in the second quarter, a year-on-year increase of 3.8%; the total usage time of video account users has exceeded 80% of the total user time of Moments, and the total playback volume has increased by more than 200% year-on-year. The total number of QQ users 568 million, a year-on-year decrease of 3.8%.

“The company will focus on improving business efficiency and adding new revenue streams, including the launch of in-feed ads on popular video accounts, while continuing to drive innovation through research and development,” said Ma Huateng, chairman of Tencent’s board of directors.