Tencent made more profit than expected in the second quarter, but sales were disappointing due to declining growth in the games division. This was demonstrated on Wednesday by the figures of the Chinese online company in which Prosus has a strong stake.
The Chinese developer of games, among others, recorded a net profit of 42.6 billion yuan, or 6.6 billion dollars, in the quarter. Revenue rose by 20 percent to 138 billion yuan, due to higher revenues from the advertising company, courtesy of the Olympic Games, and from digital payment products.
The profit was above expectations, but the turnover was somewhat disappointing, according to FactSet. Revenue growth was depressed by gaming revenue rising by only 12 percent. A year earlier, that was 40 percent. The growth was mainly International, Tencent reported. Gaming still accounts for just over half the revenue. Like many other technology giants, including Alibaba and Facebook, Tencent has been making great profits since the pandemic, as many people have to stay at home so that there was more demand for online products and services.
But in recent months, the company has been in trouble, as investors fear that the demand caused by the lockdowns will fade. Meanwhile, Beijing is tightening the reins of Chinese online companies. Over the past six months, the number of Tencent fell by more than 40 percent in value. In July, overseers thwarted Tencent’s attempt to merge the two largest gaming streaming platforms in China, Huya and DouYu. Chinese state press agency Xinhua last month called online gaming “opium for the mind “and”electronic drugs”. Tencent’s share fell sharply, as the gaming industry could become the next victim of Beijing, which previously introduced Great Power Alibaba.
The phrase about opium was later removed by Xinhua, but we pointed out that the Chinese authorities see gaming as a health problem and dream with stricter regulations. Tencent said Wednesday to strive for a healthy environment for gamers and has introduced play time for underage players of certain games in China, “more than the regulations require”. The restrictions will be rolled out across all games, the company believed, stressing that it makes only 2.6 percent of its revenue from players under 16.
By the end of June, Tencent had 1.25 billion monthly active users. That is a style of 3.8 percent year-on-year and 0.8 percent compared to the first quarter of this year. The number of Tencent closed on Wednesday in Hong Kong 0.3 percent higher. Investors could not yet act on the results. In Amsterdam, Prosus rose 3.7 percent in value.