Why Tencent’s Gaming Revenue Fell Again in Q1

Tencent’s gaming revenue fell 1% YoY in Q1

Chinese authorities froze license approvals for new games in the country in 2018, which has severely dampened Tencent’s (TCEHY) growth, as the gaming business is very important to the company. While authorities have started giving the green light to games again, it’s not at the speed the company would like.

The company’s revenue from online video games fell 0.9% YoY to 28.5 billion Chinese yuan or $4.1 billion during the first quarter. The gaming share of Tencent’s total revenue shrank to 33.4% in the first quarter of 2019 from 39.1% in the same quarter last year. Tencent’s live streaming and video revenue grew 13% YoY to 20.46 billion yuan ($3.0 billion) in the first quarter.

Why Tencent’s Gaming Revenue Fell Again in Q1

Tencent’s fintech and cloud segment continues to surge

In October 2018, Tencent announced a major restructuring. The gaming giant is now focusing on cloud and financial technology to reduce its reliance on gaming. This strategy seems to be paying off.

Tencent’s FinTech and Business Services segment, which includes its financial technology and cloud computing businesses, grew 44% YoY to 21.79 billion yuan or $3.16 billion. However, this is a steep slowdown from the 72% growth it saw in the fourth quarter.

The company’s stock has declined by 5% since it reported its first-quarter earnings. Tencent reported its worst revenue growth since its IPO of 16% YoY in the quarter, dragged down by its gaming segment.