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Chinese tech group Tencent reported its slowest revenue growth on record after being hit by China’s crackdown on technology companies and tough Covid-19 restrictions.
The company’s revenue was largely flat in the three months to March, while its net profit plummeted by 51 per cent to Rmb23bn ($3.5bn) compared with a year ago, missing analyst estimates.
Tencent’s results come a day after China’s top economic official met dozens of executives and industry experts, pledging “support” for technology companies amid a deepening economic slump.
While the Shanghai lockdown only officially began in late March, Tencent on Wednesday said its fintech earnings started to feel the impact of the harsh restrictions from mid-March.
“The resurgence of Covid-19 in several cities in China . . . negatively affected payment volume growth in categories such as transportation, dining services and apparel,” Tencent said.
Tencent, China’s most valuable company, said revenue from domestic games, a key segment for the group, dropped 1 per cent to Rmb33bn compared with a year ago, while online advertising earnings fell 18 per cent to Rmb18bn.
“Revenues from online advertising decreased . . . reflecting weak demand from advertiser categories including education, internet services and ecommerce,” Tencent said.
The company blamed “direct and indirect effects” of the government’s move last year to restrict children to about three hours of gaming a week for the hit to domestic gaming revenues.
As it faces regulatory challenges closer to home, Tencent has been looking to expand abroad over the past year and has increased its investment in foreign start-ups.
But the company said it had experienced disappointing revenue from some of its international games such as PUBG Mobile, with global gaming business earnings down 20 per cent in the quarter to Rmb10.6bn.
Bo Pei, a tech analyst at US Tiger Securities, said Tencent missed both revenue and profit estimates for the quarter primarily owing to economic weakness and pandemic lockdowns in China.
“Given that lockdowns started in mid-March and are still in place in some cities including Shanghai, Tencent’s second-quarter outlook is even more challenging,” he added.
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