Following a bruising crackdown by China on the tech sector, Chinese social media and gaming giant Tencent reported its slowest-ever growth.
After its US-listed shares closed 5.4% lower on Wall Street, Tencent shares tumbled around 6% in Hong Kong.
The stock decrease came after Tencent reported revenue of 8% higher than the year before for the fourth quarter of 2021, marking it at 144.2 billion yuan ($22.6 billion). It is the slowest revenue growth of the company since it was listed on the Hong Kong Stock Exchange in 2004.
The company’s annual revenue in 2021 rose to 16% compared to 2020, slowing from the 28% growth in 2020.
Co-founder Pony Ma and president Martin Lau joined an earnings call on Wednesday and acknowledged that 2021 was a “challenging year” for Tencent and China’s internet industry. Chinese authorities have launched a sweeping crackdown since November 2020 to bring in big players in industries ranging from tech and finance to gaming, entertainment, and private education.
The internet industry has faced “fundamental changes and challenges,” Lau said during the call, adding that “new regulations have been introduced” to correct industry misbehavior and promote fair competition, user protection, and data security.
Lau added that these “structural industry challenges” have affected Tencent’s financial performance, leading to slower revenue growth as the company adjusted to the new environment.
Both Ma and Lau endorsed Beijing’s crackdown on the tech industry, echoing regulators’ remarks that the government restrictions will help end the industry’s “reckless expansion” and “frothy growth.”
“We are proactively embracing changes to better align ourselves with a new industry paradigm,” Lau said, adding that the company will focus more on user value, tech innovation, and social responsibility.