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Tencent’s First-Quarter Net Profit Halved

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Tencent Holdings just released its financial report for the first quarter of 2022. According to the financial report, the company’s revenue in the first quarter was RMB 135.5 billion (around US$20.2 billion), flat year-over-year, while net profit was RMB 23.4 billion (around US$3.5 billion), down 51 percent year-over-year. This is its worst performance since its listing. Tencent also warned that advertisers in consumer, e-commerce and travel businesses are cutting spending. Tencent, as the WeChat messaging platform operator, said advertising sales fell 18 percent in the first quarter, year-over-year. This is the category that saw the deepest loss. The domestic gaming market revenue was down one percent year-over-year, citing tighter government regulations. Ma Huateng, the founder of Tencent, said that Tencent implemented cost control measures and adjusted some non-core businesses. Another senior executive also said that, the more people, the higher the cost, so structural changes are needed, and the company may “optimize personnel structure.” The Chinese government established the Measures for the Administration of Internet Advertising in the fourth quarter of 2021, which “enhanced” the industry supervision system. As one of the biggest sponsors of internet advertising before, the online education and training industry has plummeted. Tencent’s stock price has halved since its peak in January last year, wiping US$440 billion off its market value. This happened after China launched a regulatory crackdown to control the influence of big internet companies.

Source: NetEase, May 19, 2022