Tencent announced its third-quarter financial report on Wednesday, with revenue down 2% year-on-year and profit up 1%
Revenue of the Chinese social media and gaming giant reached 140 billion yuan ($19.75 billion) in the quarter, worse than the FactSet estimate of 141.27 billion yuan.
This is Tencent's second consecutive quarter of revenue decline.
Revenue from the domestic gaming business, Tencent's largest source of revenue, fell 7%, widening from a 1% drop in the earlier quarter.
James Mitchell, Tencent’s chief strategy officer, told analysts that regulatory restrictions on teenage gamers, the lack of video game licenses, and the weak macro economy have been the main factors hindering its gaming revenue growth.
Advertising revenue fell 5%, an improvement from an 18% decline in the second quarter. Increased demand from e-commerce consumer goods advertisers contributed to the narrowing of the decline, Tencent said.
Profit attributable to equity holders edged up 1.1% to 39.94 billion yuan ($5.63 billion), driven by better cost efficiency despite lower revenue.
Tencent said it had cut costs in its cloud service projects and also "more tightly controlled" content costs for online advertising.
In a separate statement Wednesday, the giant announced it will distribute more than 958 million Class B stock in Meituan, China's largest food delivery platform, as a special dividend to existing shareholders. The shares to be paid are worth about HK$155 billion ($19.8 billion), representing about 91% of Tencent's Class B stake.
Tencent has been reducing its stake in portfolio companies since last year, partly to appease Chinese regulators and partly to cash out its profit in these investments. In December, it announced the sale of its roughly 86% stake in JD.com for $16.4 billion, weakening ties to China's second-largest e-commerce platform. And this year it sold about $3 billion worth of shares in Southeast Asia’s biggest internet company Sea.
Besides Meituan, Tencent also holds stakes in e-commerce platform Pinduoduo, short video app Kuaishou, and ride-hailing company Didi.