Tencent Clocks First Quarterly Revenue Decline As China's Tech Crackdown, Macro Slowdown Weighs

  • Tencent Holding Ltd TCEHY registered its first-ever revenue decline after its workforce shrank almost 5%, Bloomberg reports.
  • The first-quarter FY22 revenue declined worse than estimated by 3% to 134 billion yuan ($19.8 billion) in the June quarter.
  • The net income also missed estimates, plunging 56% to 18.6 billion yuan.
  • Tencent's businesses, from advertising to cloud computing and gaming, battled China's double whammy of property slump and COVID-19 lockdowns from Shanghai to Shenzhen. 
  • China's domestic tech crackdown had already hurt the sector ahead of the macro slowdown.
  • However, online advertising revenue declined by 18%, better than analyst consensus.
  • The adjusted net income of 28.1 billion yuan beat the consensus by 15%. 
  • Tencent prioritized international games, cloud software, and WeChat video to stay in the game versus ByteDance Ltd's TikTok.
  • The fintech and business services segment, including cloud computing, is now Tencent's fastest growth engine. 
  • However, Tencent's cloud revenue suffered a mild decline after the company cut loss-making contracts and ventured into services beyond infrastructure.
  • Tencent looks to divest its $24 billion stake in food delivery firm Meituan MPNGY to win the regulators' favors.
  • Alibaba Group Holding Limited BABA and Tencent recently submitted the algorithm details of some of their products to China's top internet watchdog.
  • Price Action: TCEHY shares closed higher by 1.28% at $38.80 on Tuesday.
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Posted In: EarningsNewsTechMediaBriefs