BEIJING, May 18 (TMTPOST)— Tencent Holdings Ltd tried to mitigate the fear of layoffs after the Chinese internet giant posted the worst quarterly performance in almost two decades.

Source: Visual China

Tencent could conduct workforce optimization since the industry now experiences structural change, but the temporary factors, such as Covid-19 outbreaks, will not become a reason for the optimization, executives said in a call with analysts on Wednesday, indirectly responding to the recent layoff rumors.  “the more employees, the more cost the company has to bear, “ the management explained why Tencent requires to make the structural change to focus more on more profitable businesses.

Financial results released earlier that day showed both the top and the bottom line missed the Wall Street expectation, highlighting Covid lockdowns and regulatory tightening the world’s largest video game company faces. In the first quarter of the year, Tencent recorded the revenue of RMB135.47 billion (US$21.3 billion), roughly flat compared the same period in 2021, and the net income dived 51% year-on-year (YoY) to RMB23.4 billion, setting the biggest quarterly decline since its Hong Kong listing in 2004. Gaming, one of the company’s core businesses, saw weaker performance. Due to China’s further regulation on gaming to protection minors from becoming addicted, Tencent’s domestic game revenue dropped 1% YoY in the domestic market to RMB33 billion, compared with the 1% increase in the previous quarter. The game revenue overseas edged 4%, much slower than the previous quarter’s growth of 34%.

In an earnings call, Tencent executives noted that development of the mobile internet market suggests the mobile games still have room for expansion, though not commenting on the Law on Protection of Minors’ impact on the gaming market in China. They expected Beijng will issue more game licenses in future after it ended the eight-month license approval freeze in April, and more positive evidence in regulatory side would promote the industry’s development, though it takes time for the regulator to review license application, so does the monetization process for the new game launch.

Executive also pointed out the recent bullish news as “clear, supportive” signals from Chinese government, citing a meeting Tuesday. The meeting, chaired by China’s Vice Premier Liu He, vowed to support the development of the tech sector and both domestic and overseas public listings for Chinese tech companies.