It is a small event for the Chinese digital sector. Tencent, the country’s most powerful conglomerate, announced on August 17 that it had reduced its turnover in the second quarter of 2022 compared to the previous year. This is the first since the company went public in 2004.
The end of the endless growth of Chinese technology
Since 2004, Tencent’s growth has been written in two or even three digits. That massive rally slowed in the last quarter of 2021, in the midst of China’s crackdown on digital giants. Between April and June 2022, the group’s turnover fell 3% to $19.78 billion.
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The decline in earnings is even more surprising, as it is still 56% compared to the second quarter of 2021. It comes to $2.8 billion. For the first time since 2014, Tencent has been forced to lay off. About 5,500 employees will lose their jobs out of a total of 116,000.
Another Chinese tech giant, Alibaba, has also seen a drop in revenue. More anecdotal, 0.1%, but symbolic. to me Wall Street Magazine An era of continuous growth for major Chinese digital groups is approaching.
This situation is due to several factors. On the other hand, the Chinese economy is experiencing an overall slowdown. In the second quarter, GDP growth was limited to 0.4%. The policy of not spreading the virus in Beijing played a major role in this situation, which paralyzed all activities in many cities, including Shanghai, one of the most important economic centers in the country, or Shenzhen, the city of Tencent.
Already mentioned, Tencent’s activity was also affected, perhaps above all, by the regime’s crackdown on web giants, which lasted for more than a year and a half. One of Tencent’s main businesses, namely video games, has been hit hard.
Beijing still hinders Tencent
The most powerful company in the field has had to contend with many regulations hindering its expansion. First of all, the authorities severely limited the playing time of minors. The latter has only been allowed 3 hours of online gaming per week on pre-set slots since the summer of 2021.
During the same period, Beijing completely stopped giving permission to release new games until April 2022. This relaxation did not benefit Tencent or its small rival NetEase, and none of their games have been approved since.
Nothing new, even major licenses like pubg mobile where honor of kingsFinally, the steam runs out. As a result, the company’s revenue decreased by 1%. Those at the national level represent $4.7 billion, and internationally they amount to $1.58 billion. Martin Lau, president of Tencent, said on a conference call that he expects to get clearance from authorities in ” near future “.
Tencent’s advertising business has been hardest hit by the surrounding economic downturn. Advertisers tend to be closer to their money and this shows with an 18% drop in revenue to $2.74 billion. Tencent is relying on its new short video platform, combined with its 1 billion-subscriber social network WeChat, to quickly generate new revenue. The company decided to go fishing on the flowerbeds of ByteDance and Douyin, the Chinese counterpart of TikTok.
Trying to manage the group reassurance
The FinTech and business category that combines WeChat Pay and cloud computing revenue showed lower 1% growth. Generates 6.22 billion in trading volume. Tencent reports that ” FinTech services revenue growth was slower sequentially as a resurgence of COVID-19 temporarily impacted the commercial payments business in April and May “.
Bonnie Ma, CEO and founder of Tencent, tried to reassure investors. He insisted on the measures his company had taken in the face of this delicate situation,” We have actively exited non-core activities, tightened marketing spending and reduced operating expenses Online educational activities and certain parts of the cloud that are considered unprofitable have paid the price. Bonnie Ma believes that these decisions will allow growth to return, even if the group’s revenue does not develop in the right direction.