Game Over

Image source: Vlad Kagoshima, Cassiano Correia, Miguel Lagoa, Koshiro K, ganjalex - Shutterstock

What's going on?

Chinese gaming giant Tencent reported its slowest quarterly revenue growth on record on Wednesday.

What does this mean?

Tencent is a bit of an outlier among Chinese tech companies, having escaped the governments otherwise unforgiving attack on the sector. But it was still burned by the fallout: the companys online advertising revenue fell 18% last quarter from the same time last year, as companies that were directly affected like online tutors and insurers wound back their ad spending. TikTok-owner ByteDance didnt help either, poaching plenty of its would-be advertisers for itself. To add insult to injury, growth in Tencents gaming division practically stalled, as the company waits for regulators to approve new game releases. That led the companys overall revenue to grow by just 0.1% the smallest uptick since it listed on the stock market 18 years ago.

Why should I care?

For markets: The tortoise and the hare.
Tencent is still Chinas most valuable company, but its market value has more than halved from around $930 billion in February 2021 to around $450 billion today. Thats a pretty pronounced turnaround, given that for years it was one of the fastest-growing companies in the world. Things are so bad, in fact, that its now growing slower than even utilities companies: the top ten firms in this notoriously lethargic sector grew 8.6% a quarter on average last year.

The bigger picture: Look whos come crawling back.
The Chinese government said this week that it would now be going out of its way to support its tech companies, which helped an index tracking some of the countrys biggest to rally this week. As for why its chosen now the precise moment its economy has started to flag to cozy up to the biggest driver of its economic growth in the past decade, its a mystery.

Originally posted as part of the Finimize daily email.

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