Tencent, the Chinese technology giant, recorded on Wednesday, August 17, the first drop in its quarterly turnover since its IPO in 2004, suffering from the country’s economic difficulties and the consequences of the coronavirus pandemic.
Revenue for the second quarter of its fiscal year fell 3% year-on-year to 134 billion yuan (19.3 billion euros), according to a statement from Tencent. Profit fell 56% to 18.6 billion yuan.
In addition to the economic context and the consequences of the pandemic, the Internet and video game giant, owner of the ubiquitous WeChat application (social network, online payment) in China, must also deal with regulatory tightening in a context of takeover of the technology sector. .
5,500 jobs lost
Tencent said it cut around 5,500 jobs, reducing the number of its employees to 110,715 at the end of June, the company’s first drop in workforce since 2004 as well.
Tencent points out that it gets almost half of its revenue from fintech and business services, opening the door to growth when the Chinese economy is booming.
China froze for nine months any new video game licenses, denounced for their addictive side among young people, not resuming their authorizations until April. However, Tencent and its competitor NetEase did not obtain new licenses.
“Transition Challenges”
According to Tencent, China’s domestic video game market is facing “transitional challenges” and the international market is in “a post-pandemic digestion period” and people are resuming entertainment spending in other areas.
In the second quarter, online ad sales fell a record 18% year-on-year, reflecting “noticeable weakness in internet services as well as the education and financial sectors,” Tencent noted.
Tencent is one of the big names in Chinese technology, under pressure from regulatory uncertainties.
Since the end of 2020, the authorities have been particularly uncompromising against certain practices of digital giants, which were previously widely tolerated, in particular regarding the collection of personal data and competition.
Beijing has thus multiplied the blows against the powerful internet companies, prevented from raising money internationally or fined for abuse of a dominant position.
Giants in trouble
These measures have caused the sector to lose billions of dollars in market capitalization. The economic difficulties also weighed. Alibaba, the Chinese e-commerce giant, announced in early August a slight drop in quarterly sales for the first time in its history.
Before the quarterly results announcement, Tencent shares had risen less than 0.1% on the Hong Kong Stock Exchange.
The day before, Tencent had announced its intention to sell all or most of its $24 billion stake in Chinese food delivery company Meituan. In Hong Kong, Meituan’s stock lost more than 10% on Tuesday after this announcement, Tencent’s then fell slightly before recovering.
Source: BFM TV
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