Tencent 2Q Net CNY42.59B Vs. Net CNY33.11B >0700.HK

By Yifan Wang

Tencent Holdings Ltd.’s net profit rose 29% in the second quarter, as sharply higher revenue from business services and advertising operations offset a slowdown in its gaming business growth.

The Chinese video-game developer on Wednesday posted a net profit of 42.59 billion yuan (US$6.57 billion) for the April-to-June quarter, while revenue grew 20% to CNY138.26 billion on the back of higher income from its advertising operations and digital-payment products.

Tencent’s profit beat analyst estimates, but revenue fell short, according to FactSet. The firm’s top-line growth in the past quarter was dragged by slowing gaming revenue, which grew a mere 12%, compared with a 40% jump during the same period last year.

Tencent, like many other technology giants, including Alibaba Group Holding Ltd. and Facebook Inc., has booked lofty profits since the coronavirus pandemic started, as homebound consumers turned to online products and services.

But the company ran into trouble in recent months, as investors grew worried about easing lockdown-triggered demand, while Beijing increasingly sought to rein in the country’s internet industry.

Earlier this month, a Chinese newspaper affiliated with state news agency Xinhua criticized online gaming as “opium for the mind.” The article raised concerns that Tencent’s popular games could be swept up into a broader regulatory crackdown, and triggered a market selloff. The article later disappeared before re-emerging in a toned-down form, without the “opium for the mind” line.

In July, regulators blocked Tencent’s bid to combine the country’s two biggest game-streaming platforms–Huya and DouYu. Authorities had also earlier issued a minor fine against Tencent, together with a dozen companies, over a number of past investment deals.

The string of regulatory actions sent Tencent shares tumbling to near a one-year low in July and the stock has lost over 40% the past six months.

Write to Yifan Wang at [email protected]

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