China's Tencent Records Less Than Expected Revenue Rise

China’s Tencent Holdings posted an 11% increase in second-quarter revenue on Wednesday, which analysts regarded as a disappointing result, given the tech giant’s formidable record.

Tencent operates the massive WeChat messaging platform and is also the world’s biggest video game company, but the latest result is smaller-than-expected.

Analysts say the country’s sputtering economic recovery has weighed on the social media and gaming giant’s recovery from last year’s record downturn.

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Tencent reached 149.20 billion yuan ($20.45 billion) for the three months ended June 30. That was below the 151.73 billion yuan average of 21 analyst estimates compiled by Refinitiv.

Revenue growth was little changed from a 10.7% rise in the first quarter.

Tencent posted a 1% revenue drop in the same period last year, when it reported its first ever sales decline, after it was hit by Beijing’s bruising regulatory crackdown on its sprawling tech sector.

Tencent’s net profit rose 41% to 26.17 billion yuan as compared to the same period last year. But it fell under the 33.41 billion yuan average analyst estimate.

Regulatory concerns not completely over

Regulatory concern has eased this year for China’s tech giants, including Tencent, with Chinese authorities keen to boost private sector confidence.

However, China’s cyberspace regulator said last week it wanted the use of smartphones by youngsters aged 16 to 18 limited to two hours a day, while children aged eight to 16 would get one hour and kids under eight would be allowed just eight minutes.

In draft rules published early this month, the Cyberspace Administration of China (CAC) asked providers of smart devices to introduce so-called minor mode programmes that would also bar users under 18 from accessing the internet on mobile devices from 10pm to 6am.

But it said service providers could allow parents to opt out of the time limits for their youngsters.

Meanwhile, the world’s second-largest economy failed to surge after it lifted Covid restrictions late last year.

Anxiety is rising that China is entering an era of much slower economic growth akin to the period of Japan’s “lost decades”.

China’s post-pandemic recovery has slowed after a brisk start in the first quarter as demand at home and abroad weakened and a flurry of policies to support the economy failed to shore up activity.