The company said on Wednesday that revenue fell 3% to 134 billion yuan ($19.78 billion) in the three months ended June 30 from 138.3 billion yuan a year earlier. Analysts had expected a decline.
“In the second quarter, we actively exited non-core businesses, reduced our marketing spend, and reduced operating expenses,” said Ma Huateng, chairman and chief executive officer of Tencent.
Net income attributable to shareholders fell 56% to 18.6 billion yuan, below analysts’ estimate of 25 billion yuan.
China cut key lending rates on Monday to revive demand as data showed a slowdown in July, indicating the world’s second-largest economy is struggling to shake off a second-quarter blow to growth due to strict Covid restrictions.
According to sources, Tencent is cutting stakes in portfolio companies partly to appease Chinese regulators and partly to lock in its huge profits from these rates.
The Shenzhen-based giant has lost nearly 60% of its market value since its peak in February 2021 following Beijing’s regulatory measures to curb the influence of big internet companies. However, the $373 billion company retained the crown of China’s most valuable company.
Revenue from online gaming, Tencent’s main source of profit, declined both at home and abroad, with each down 1%. Tencent has yet to receive a new gaming license from Chinese regulators after they temporarily suspended approval.
Its social networks reported a 1% increase in revenue as WeChat earned more from its video content.
“In the short term, this could be the biggest growth driver,” said Sean Young, managing director of Blue Lotus Capital Advisor, referring to WeChat’s video revenue.
Tencent reported second-quarter ad revenue of 18.6 billion yuan ($2.74 billion), down 18% as advertisers remain cautious about their budgets, but Yang said it wasn’t as bad as some analysts expected.