Tencent Holdings Ltd reported its first quarterly profit decline of 2 percent at 17.9 billion yuan or $2.59 billion in April-June year-on-year, falling short of analysts' expectation of an average profit of 19.3 billion yuan or as much as $3 billion.
Tencent's profit drop has become the worst the company has posted in nearly 13 years according to Reuters.
The report came as the company announced its financial results on Aug. 15 for the second quarter and first half year of 2018 that ended on June 30.
Tencent's revenue actually grew by 30 percent but it was the most sluggish movement the company has demonstrated in three years. It recognized that poor gaming revenue was the most significant factor of its less than satisfactory financial results.
Tencent's mobile games revenue initially grew by 19 percent year-on-year but declined by 19 percent consecutively after problems on non-monetize gaming products occurred and lack of new game releases had caught up with the company.
The company's PC Client games revenues have also suffered decline by 5 percent year-on-year and another 8 percent quarter-on-quarter. Tencent recognized that profit fall in this regard was brought by users' preference of playing mobile games.
Ma Huateng, Tencent chairman, and CEO has nevertheless remained optimistic, particularly that the team knew where to bring the company to recover from the hurdle. Tencent will remain committed to investing in new technologies and in the development of innovative products, Ma said in an official statement.
Tencent's quarterly results were announced following a day where investors dumped their shares of the company, slashing as much as $15 billion off its market value. The reaction came after Tencent's decision to drop its video game Monster Hunter: World from its WeGame platform merely a week after its release.
In fact, shares of Tencent had continuously tumbled for a fourth day even before the company's announcement of its poor quarterly performance according to the South China Morning Post. The shares plunged to its 10-month low as investors had continued selling the stock in the days leading to Tencent's financial report on Wednesday. The stock declined to as much as 3.9 percent, the lowest intraday level since September 2017.
Benjamin Wu, an analyst with consultancy Pacific Epoch, told Bloomberg that it could get worse for the company. The issue on Monster Hunter being taken down showed that Tencent is not excused from China's regulatory crackdowns, Wu added.
Martin Lau, company president, explained that Chinese regulators decided to block Monster Hunter for being "not exactly compliant." Lau said Tencent has since been working with their developer to make the content more yielding to China's standards.
Li Yujie, an analyst with RHB Research Institute in Hong Kong, described Tencent's quarterly report as worse than expected. Li believed that Tencent's inability to monetize its PlayerUnknowns' Battlegrounds or PUBG in China continuously drag the company's profits down.
Indeed, Lau said the company recognized that Tencent could only bounce back from its profit decline if it gets approval from Chinese regulators to monetize PUBG. More than 400 million people across the world are playing PUBG. Lau, however, underlined that monetizing PUBG is something that is out of the company's control.
