What's going on?

Tencent posted better-than-expected earnings on Wednesday, but investors refused to be distracted: they�re sure regulators are plotting something.

What does this mean?

You�re probably used to hearing that 2020 was a bumper year for tech firms, so these latest results from Tencent � which beat expectations for a fourth-straight quarter � were more or less par for the course. Most notable were the company�s sales, which topped forecasts thanks to 29% growth in its main business � online gaming � compared to the same time in 2019. Trouble is, it�s a big slowdown from the quarter before, as well as the segment�s slowest growth in a year. That might leave investors wondering if the gaming boom won�t just peter out once this whole pandemic thing clears up�

Why should I care?

For markets: No one knows how far Chinese regulators will go.

Investors had bigger fish to fry than Tencent�s latest numbers, mind you: China�s regulators are digging into the company�s online ads and fintech businesses, as well as an investment portfolio that spans hundreds of startups. All that scrutiny hasn�t done its stock any favors, which has dropped 18% since its peak in January (tweet this). It�s still not clear how far China intends to go to rein in Tencent�s power, but some more optimistic analysts have pointed out that the company�s biggest business � which accounts for almost 70% of its profit � has escaped the crackdown so far.

The bigger picture: Tech companies have high standards to hit.

One of Tencent�s investments is in Chinese video app Kuaishou, whose share price surged 160% on its first day of public trading last month � the biggest tech initial public offering since Uber�s in 2019. Shame, then, that its maiden results as a listed company on Wednesday were less of a hit: the company reported a drop in its live-streaming revenue, and investors � eyeing up the ever-growing competition from Bilibili and Joyy � sent its shares down 12%.