Tencent reported that net profit fell 2% to 17.9 billion yuan ($2.7 billion YSD) rather than the expected 19.6 billion yuan / $11.1 billion. It also announced a 30% rise in revenue to 73.6 billion yuan ($11.billion), but was anticipated to have revenue of 77.3 billion yuan, according to Thomson Reuters.
The Hong Kong stock drop is the first in at least a decade for the company and the company has lost more than $160 billion in market value since its January peak, according to Bloomberg. Shares closed Wednesday at 336 HKD, down 3.61 percent for the day, and down from the all-time peak of 467.60 HKD.
The struggles apparently come from the gaming sector. There are shifting regulations in China that have made it difficult for Tencent to launch its video games. Earlier this week, regulators halted the sales of Monster Hunter: World the same week it was supposed to launch, according to Deadline Hollywood, yet Tencent executives claimed it was an isolated incident during an investors call.
The company needs new content to keep users on its WeChat messaging service, Bloomberg said, over which it sells its in-game items and advertising to WeChat’s billion-plus users. WeChat active users climbed almost 10 percent to 1.06 billion in the June quarter, however.
“From a revenue growth perspective, gaming is a key area of weakness, our biggest game is not monetizable,” President Martin Lau said on a conference call. “This is something that’s a little out of our control, but over time we’ll solve it.”
In December, Tencent Music and Spotify did a 10% equity swap and in March led a $115 million investment round for India-based streaming service Gaana. The company confirmed in July it would float an IPO of its music division on a U.S. stock exchange with a projected value of more than $30 billion.
No date for the IPO has been set.