Tencent, powered by China’s gaming penetration, has seen its slowest earnings growth in two years

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Chinese gaming and social media giant Tencent posted its slowest quarterly earnings growth in two years on Wednesday, being hit by a gaming raid, and said the outlook for the advertising sector would remain weak into next year.

Net income for the three months ended September rose 3 percent to CNY 39.5 billion (approximately Rs.45,962 billion), the company said in a statement. This exceeded the expectations of analysts who, according to refinitive data, predicted a decline.

Revenue rose 13 percent to CNY 142.4 billion (approximately Rs.165.715 billion), slightly below expectations and the slowest quarterly growth since the company went public in 2004, data from Refinitiv showed.

China’s largest company by market value has been hit by new limits on the amount of time minors can spend playing video games. The government has not approved any new games since August.

Beijing’s years of crackdown on its once-unbridled internet industry has punished well-known companies for engaging in previously considered regular market practices and wiping billions of dollars off their market values.

“In the third quarter, the Internet industry, including the domestic gaming industry, and certain categories of advertisers, adapted to new regulatory and macroeconomic developments,” Tencent’s chairman and CEO Pony Ma said in a statement.

“We are proactively adopting the new regulatory environment, which we believe should contribute to a more sustainable development path for the industry,” he said.

Mobile game sales rose 9 percent, the owner of games like Honor of Kings and PUBG Mobile said in a statement.

Tencent said minors accounted for 0.7 percent of domestic game time as of September this year, up from 6.4 percent in September 2020 after the government’s new restrictions went into effect earlier this month.

Regulatory crackdowns have also hit tutoring centers and the medical beauty industry, curbing these industries’ appetites for advertising.

Tencent said the rate of advertising revenue growth slowed over the reporting period, citing such regulatory factors as well as macroeconomic challenges. It expected advertising prices to remain soft across the industry for several quarters, but said the industry should adjust over the next year, it said.

Tencent has lost nearly 18 percent of its market value this year, up from a 9 percent decline in the broader market.

© Thomson Reuters 2021

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