China internet giant Tencent Holdings reported second-quarter results early Wednesday that missed estimates on the top and bottom lines. But Tencent stock climbed as a decline in ad revenue ended up smaller than expected.
The company reported adjusted earnings of 28 cents a share on revenue of $19.7 billion. Analysts expected Tencent to report earnings of 38 cents a share on revenue of $19.9 billion, according to FactSet.
Revenue dropped 3% from the year-ago period. It was Tencent's first revenue decline from the year-ago period since its initial public offering in 2004. Earnings fell 57%.
The company is struggling with a weak China economy, Covid-19 shutdowns and a regulatory crackdown. Alibaba, a Tencent competitor, also recently reported its first quarterly revenue drop.
Tencent Stock Action
Tencent stock gained 3.1% to close at 40.01 on the stock market today.
There was some good news in the report. Though online advertising revenue slid a record 18% in the quarter, that was better than analysts feared. In addition, Tencent said it planned steps to boost revenue and profit.
"During the second quarter, we actively exited noncore businesses, tightened our marketing spending, and trimmed operating expenses," Chief Executive Ma Huateng said in written remarks with the Tencent earnings release. "Looking forward, we will focus on enhancing the efficiency of our businesses and launching new revenue initiatives, while continuing to drive innovation through R&D."
Huateng added, "We generate approximately half of our revenues from financial technology and business services as well as online advertising that directly contribute to, and benefit from, overall economic activity, which should position us for revenue growth as China's economy expands."
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