Tencent delivered disappointing second quarter results as the Chinese technology giant struggles with regulatory hurdles for its gaming business.
The company said its net profit fell 2% to 17.9 billion yuan ($2.7 billion), well shy of the consensus analyst estimates of 19.6 billion yuan for the quarter ended June 30. Revenues rose 30% to 73.7 billion yuan ($11.1 billion), but fell short of the 77.3 billion yuan projected by analysts, according to Thomson Reuters.
Tencent has been hit by a shifting regulatory environment in China, which has made it harder for the company to win approval for the sale of its games.
On Monday, regulators halted sales of Monster Hunter: World less than a week after its launch. During an investor call, Tencent executives sought to cast the episode as an isolated incident.
Monster Hunter had won regulatory approval, but was pulled amid objections over the content. Executives said Tencent is working to make changes to the game, so it will be made available in the future and is attempting to work more closely with government regulators to “improve this process going forward.”
Tencent launched a mobile version of the popular South Korean game, PlayerUnknown’s Battlegrounds (or PUBG), but has been unable to win regulatory approval to offer in-game purchases. Executives told investors this morning that it didn’t have “visibility” on when that might happen.
Online games are the single largest source of income for Tencent, accounting one-third of the internet giant’s revenue.
Video was one of the bright spots in the company’s results, with its Netflix-like streaming service reaching 74 million subscribers, up 121% from a year ago. Tencent said subscription gains were fueled by popular content, such as the drama Legend of Fuyao, and the popular variety show Produce 101.