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Chinese tech giant Tencent’ earnings for the second quarter missed market expectation, as a sputtering economy weighed on its recovery from last year’s record downturn.
Tencent’s net income surged 41% year over year in the second quarter to 26.2 billion yuan ($3.6 billion), lower than market expectation of 32.3 billion yuan in part due to a 2.99 billion yuan fine levied on its fintech business by regulators. Revenue grew 11% to 149.20 billion yuan, below expected 151.73 billion yuan.
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 on its first-ever sales decline amid Beijing’s regulatory crackdown on the tech sector.
Online advertising surged 34%, the fastest pace in almost five years, in part due to algorithmic tweaks and a favorable comparison with last year’s Covid trough.
Tencent’s core gaming business experienced weaker-than-expected growth in the quarter. Domestic gaming revenue was little changed at 31.8 billion yuan, while international gaming revenue rose 12% to 12.7 billion yuan, excluding the impact of currency movements.
James Mitchell, the company’s chief strategy officer, attributed slow growth in video games to a decision “to temporarily release less commercially impactful content” in the second quarter.
Revenue from fintech and business services grew 15% to 48.6 billion yuan which the company said reflected expansion in both offline and online payment activities.
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.