Chinese tech giant Tencent has cut more than 5,000 jobs and closed parts of its business as it grapples with the first drop in sales in its history.
The company’s revenue fell 3% year over year from April to June, hurt by declines in advertising spending and online gaming businesses.
The WeChat owner is feeling the impact of a regulatory crackdown on gaming, as well as a broader economic downturn.
China’s central bank cut interest rates Monday to boost activity.
The country, which continues to respond to Covid outbreaks with mass shutdowns, reported last month that its economy had contracted sharplythree months to July, signaling that it could miss its official growth target of 5.5%.
Speaking on Tuesday, Chinese Premier Li Keqiang said China is facing the “most difficult point of economic stabilization” and urged provincial leaders to step up their support for the economy.
“We must solidify the basis for economic recovery and development with a sense of urgency that cannot wait,” he said.
Other companies have also taken a hit, notably e-commerce giant Alibaba, which said it hadn’t seen sales growth in its latest update to investors, a first for the company.
Tencent, which went public in Hong Kong in 2004, has enjoyed rapid growth for a long time.
Today, it is the country’s most valuable public company and is known for its WeChat messaging service and slate of online games.
About half of its revenue comes from online advertising, financial and business services, which have seen the impact of the broader downturn, with revenue growth from cloud and other offerings falling sharply while ad sales plunged 18%.
The company has faced challenges since China tightened restrictions on children’s games and halted the approval of new games last year. While those approvals have resumed, Tencent has yet to get the green light for any of its games, forcing it to rely on older titles.
Gaming revenue fell 1% in China and its international markets “due to the post-COVID normalization of user spend on mobile games across the industry,” the company said in a presentation.
The company said it has shut down online education, e-commerce and gaming live streaming units. The layoffs during the quarter affected about 5% of the total workforce.
“In the second quarter, we actively exited non-core businesses, streamlined our marketing spend and cut operating expenses,” said Tencent CEO Ma Huateng, known as Pony Ma.
He added that the company is focused on “increasing the efficiency” of its businesses and is well positioned once the Chinese economy begins to recover.
Total revenue was 134 billion yuan ($19.8 billion) year-on-year, while profits fell 56 percent to 18.6 billion yuan.
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