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BEIJING, August 17 (TMTPOST)— Tencent Holdings Ltd. signals to continue efforts for cost control including job cuts and expects the overall sales to resume positive growth following its first quarterly sales decline, underling the challenges amid the regulatory tightening in gaming business and Covid-19 pandemic.
Source: Visual China
Tencent missed analysts’ estimates in both the top line and bottom line during the quarter ended June. The revenue fell 3.2% year-over-year (YoY) to RMB134 billion (US$19.8 billion) in the quarter, the first ever yearly decline for the Chinese tech giant. The net income dropped 56% YoY to RMB18.6 billion, compared with the market projection of RMB25.03 billion. Revenue from gaming, one of Tencent’s core businesses, decreased 1% to RMB41.9 billion, while another major segment fintech and business services failed to maintain robust growth with a modest 0.7% increase in revenue. Online advertising revenue posted worse performance with a yearly decrease of 18.4%, hit by headwinds including the resurgence of Covid-19 infections and macroeconomic slowdown.
In an earnings call with analysts, Tencent management said the company is engaged in cost control currently and it still has room to further reduce the cost as the previous efforts to optimize the staff and payroll management would continue. They expected the effect of cost control to further emerge in the second half of the year and believed the company can return to positive growth in revenue in the coming quarters even though its video game business continues cooling.
As to the recent reports about a possible dumping most or all of stakes in Meituan, China’s food delivery giant, Tencent executives said the reports are incorrect. Tencent always focuses on reasonable capital allocation when it comes to investments and unloading holdings, according to the executives. They noted Tencent’s shares and portfolios are highly undervalued at the moment. The company would consider cutting troubled investments and more forms of reward to make shareholders benefited from investment decisions, they added.
