As it struggles with its first ever revenue decline, Chinese digital giant Tencent has laid off more than 5,000 employees and shut down portions of its operations.
The company’s revenue decreased 3% year over year between April and June as a result of falling advertising spending and its online gaming division.
The owner of WeChat is suffering from both the general economic slowdown and a regulatory crackdown on gambling.
In an effort to boost activity, China’s central bank lowered interest rates on Monday.
The nation, which continues to respond to Covid outbreaks with widespread closures, said last month that its GDP had shrunk significantly in the three months leading up to July and hinted that it would not meet its stated 5.5% growth objective.
Premier Li Keqiang of China stated in a speech on Tuesday that China was at “the most difficult stage of economic stabilization” and he asked the leaders of the provinces to increase their support for the economy.
“With a feeling of urgency that cannot wait, we must strengthen the framework for economic recovery and progress,” he added.
Other businesses have also suffered, most notably e-commerce behemoth Alibaba, which disclosed in its most recent statement for investors that it had not seen any revenue growth—a first for the business.
Tencent has had continuous, fast development since it went public in Hong Kong in 2004.
It is presently the most valuable publicly traded firm in the nation and is well-known for its WeChat messaging platform and selection of online games.
Its online advertising, banking, and business services account for almost half of its income. Here, the impacts of the general slowdown were noticeable, with revenue growth from cloud and other solutions slowing noticeably while ad revenues fell 18%.
Since China tightened regulations on children’s game play last year and stopped approving new games, the company has experienced difficulties. Despite the fact that the approvals have restarted, Tencent has yet to have one of its games approved, leaving it with little choice except to rely on older games.
According to the company’s presentation, user spending on mobile games has “normalized industry-wide post-COVID,” which has resulted in a 1% decline in gaming income in China and its overseas markets.
The business said it had shut down its live game broadcasting, e-commerce, and online education divisions. About 5% of the whole staff was impacted by the layoffs during the quarter.
The head of Tencent, Ma Huateng, also known as Pony Ma, stated that during the second quarter, “we vigorously abandoned noncore industries, reduced our marketing expenditure, and slashed operational expenses.”
He continued by saying that the company was well-positioned for when the Chinese economy started to revive and was focused on “improving the efficiency” of its companies.
Compared to the previous year, total revenue was 134 billion yuan ($19.8 billion), but earnings fell by 56 percent to 18.6 billion yuan.