Tencent executives have said that international games, cloud software and WeChat video will be their major strategic priorities.
On August 17, 2022, Tencent released its half-year performance for 2022 and reported a revenue of CNY 134 billion (USD 19.8 billion) in the June quarter, down 3 percent from a year ago, worse than the consensus estimates of CNY 135.6 billion, according to 28 analysts polled by Bloomberg. Net income reached CNY 18 billion in the period, down 56 percent from a year ago, missing analysts' estimates of CNY 25 billion. Tencent has downsized its workforce for the first time since 2014, slashing the number of employees to 110,715 by the end of June, down from 116,213 in March, according to the company. Its remuneration cost for the second quarter was CNY 27.55 billion, down from CNY 29.2 billion in the first three months of 2022.
China’s giant internet industry had resigned itself to a new era of sedate growth after a decade of free-wheeling expansion. However, the sweeping tech crackdown in 2021 wiped more than USD 1 trillion off their combined market value. Tencent is also grappling with a deepening downturn in the global economy. Worse, the uncertainty from property slump and coronavirus lockdowns is wreaking havoc on businesses from advertising to cloud computing and gaming.
Although regulators resumed approving games in April after a months-long hiatus intended to curb addiction, China’s premier developer has yet to win a nod for a single title this year. For now, it’s counting on aging cash cows like Honor of Kings to spur its most lucrative business while fighting newer hits like Genshin Impact and Diablo Immortal. The company, which once relied on a network of investments spanning hundreds of firms to create opportunities and new markets, has since last year signaled it will begin selling down stakes in major Chinese internet investees, from e-commerce giant JD.com Inc. to Meituan.
However, some positive indicators make us still hold on to hope. Online advertising revenue slid a record 18% in the quarter, better than analysts' precedent forecast. And the adjusted net income of 28.1 billion CNY was about 15% above expectations. Given the new realities, Tencent executives have said that international games, cloud software and WeChat video will be their major strategic priorities. The TikTok-style feed inside Tencent’s app matrix is the company’s latest hope of countering the changing business environment.