**Chinese tech giant Tencent Holdings Ltd. reported disappointing third-quarter earnings on Wednesday, November 9, 2022, sending its stock price tumbling in both Hong Kong and New York.**
**Key Financial Metrics:**
* **Revenue:** Tencent’s total revenue for the three months ended September 30, 2022, was RMB 140.1 billion (US$19.8 billion), a 2% increase year-over-year. This increase was primarily driven by growth in its cloud computing and advertising businesses.
* **Net profit:** Tencent’s net profit attributable to equity holders of the company for the third quarter of 2022 was RMB 39.9 billion (US$5.6 billion), a 56% decrease from the same period last year. This significant decline was attributed to a combination of factors, including macroeconomic headwinds, regulatory pressures, and increased competition.
**Business Performance:**
Tencent’s online gaming business, which has traditionally been a major revenue driver for the company, continued to face challenges during the quarter. Domestic game revenue declined by 7% year-over-year, primarily due to a regulatory crackdown on gaming content and a shift in user preferences towards overseas games. Tencent’s international game revenue also fell by 2%, as the company faced increased competition from global gaming giants such as Activision Blizzard and Electronic Arts.
Tencent’s social media business, which includes WeChat and QQ, maintained its strong user base, with WeChat’s monthly active users reaching 1.3 billion. However, the company’s social media revenue growth slowed down, as the market becomes increasingly saturated and competition intensifies.
Tencent’s cloud computing business, Tencent Cloud, continued to grow rapidly, with revenue increasing by 40% year-over-year. The company is investing heavily in this business to capitalize on the growing demand for cloud services in China. Tencent Cloud is now one of the top cloud providers in the country, competing with Alibaba Cloud and Huawei Cloud.
**Stock Market Reaction:**
Following the release of its earnings report, Tencent’s stock price fell sharply in both Hong Kong and New York. In Hong Kong, the stock price dropped by over 11%, while in New York, it fell by more than 10%. The decline in the stock price reflects investor concerns about the company’s slowing growth, regulatory headwinds, and increased competition.
**Outlook:**
Tencent faces significant challenges in the coming quarters, including the ongoing regulatory scrutiny, intense competition, and a slowing Chinese economy. The company is expected to continue to invest heavily in its cloud computing and international gaming businesses to drive growth. However, the regulatory environment remains uncertain, and it is unclear whether Tencent will be able to sustain its past growth rates.
**Sources:**
* [Tencent Reports Third-Quarter 2022 Results](https://www.tencent.com/en-us/investor-relations/news/20221109-tencent-reports-third-quarter-2022-results.html)
* [Tencent’s Stock Price Plummets After Disappointing Earnings](https://www.bloomberg.com/news/articles/2022-11-09/tencent-stock-falls-after-profit-miss-deepens-china-tech-rout)
* [Tencent’s Earnings Miss Highlights Challenges Amid China’s Tech Crackdown](https://www.nytimes.com/2022/11/09/business/tencent-earnings-china.html).
