Tencent reported a 56% YoY fall in net profit to RMB 18.6bn ($2.7bn), lower than analysts’ estimates of RMB 25.3bn ($3.7bn) in Q2. Revenue dipped 3% YoY to RMB 134bn ($19.8bn), its first decline since 2004. The government’s regulatory clampdown, which started in late 2020, on its gaming business and weak economy on strict Covid-19 lockdowns led to its first quarterly sales fall. Regulators had lifted gaming license restrictions in April this year but Tencent is yet to get a new license. This was noted to have affected its sales. Overall online games revenue fell by 1% YoY to RMB 42.5bn ($6.3bn), and Fintech & Business services segment revenue rose 1% YoY to RMB 42.2bn ($6.3bn). The company has cut marketing expenses and also closed non-core businesses such as e-commerce, online education, and game live-streaming. Tencent is shunning loss-making businesses and focusing on profitability. The company expects Wechat’s video accounts to drive advertisement sales and to be a significant revenue contributor.

Separately, Tencent’s Chief Strategy Officer James Mitchell said that an earlier report that the company was looking to sell most of its $24bn stake in Meituan was incorrect, Bloomberg reported. Meituan shares were up 3% on US stock exchanges on Wednesday. In earnings call Tencent said that the regulatory environment in China is becoming more supportive.

Tencent’s dollar bonds were lower with its 3.94% 2061s down 0.46 points to 74.21, yielding 5.57%.

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