To The Moon

$TENCENT(00700)$

Revenue Decline but Share Prices Up![Happy] 

Tencent logged its first-ever revenue decline after online advertising sales fell by a record, underscoring the extent to which China’s worsening economy is hurting its biggest corporations.

The country’s most valuable company slashed 5,000 jobs or nearly 5 per cent of its workforce – the first quarterly drop in staffing since 2014 after layoffs rippling through the global tech sector finally hit the WeChat operator. Revenue fell a deeper-than-projected 3 per cent to 134 billion yuan ($28.5 billion) while net income also missed estimates, plunging 56 per cent in the June quarter.

Just like Mark Zuckerberg’s Meta, Tencent is staking its claim of a possible future of the virtual realm of the metaverse. The Chinese company has revamped its ageing social app QQ with customisable 3D avatars and Unreal Engine graphics, and is hiring developers to make open-world titles. But such endeavours, along with a steady pace of investment in overseas game studios, could pressure margins before they come to fruition.

“During the second quarter, we actively exited non-core businesses, tightened our marketing spending, and trimmed operating expenses,” Tencent co-founder Pony Ma said in a statement. That “should position us for revenue growth as China’s economy expands.”