Tencent fires gaming and fintech staff in wake of miserable Q1

On May 25, 2022 40

Tencent Holdings reported poor results for quarterly revenues, as the tech titan failed to grow for the first time since its 2004 IPO. © Reuters

Tencent Holdings is firing swaths of people from its gaming and fintech departments amid mass layoffs that started in March, as the tech titan reports weak performance amid a regulatory crackdown and the COVID-19 pandemic.

The Shenzhen-headquartered giant is ditching employees at its Interactive Entertainment Group (IEG), which includes a lucrative gaming department, Caixin learned.

A source inside IEG said the layoffs at the group, which accounts for nearly 10% of Tencent’s total head count, were in part a consequence of the government freezing approval of new games for months. The source said this left many workers responsible for game distribution without much to do.

Beijing started approving new games in April, when 45 titles from companies including Baidu, Yoozoo Games and iDreamSky Technology Holdings were granted publishing licenses. But industry leaders Tencent and NetEase were absent from the list, which was also about half the length of the previous list in July last year.

Tencent’s fintech division — which includes cloud computing and online payments — is also showing some of its employees the door. A source at the division attributed the move to a COVID-induced drop in workloads.

It is unclear how many employees are losing their jobs across the company.

The wave of layoffs started in mid-March, when Tencent fired around an eighth of its Platform and Content Group (PCG) due to lackluster advertising revenue, Caixin learned. Layoffs also affected the Cloud & Smart Industries Group.

Several company sources told Caixin that job cuts at PCG would continue, with total redundancies expected to top 15%. Tencent will find it “very hard” to generate advertising revenue this year due to the rising domestic impact of the pandemic, one of the sources said.

Last week, Tencent reported poor results for the first quarter. Net profit attributable to shareholders plummeted 51% year on year to 23.4 billion yuan ($3.46 billion). Revenue, which reached 135.5 billion yuan, grew at the slowest pace since the company’s 2004 initial public offering.

The company blamed the performance on the double hit of virus flare-ups and Beijing’s tech sector crackdown, both of which hurt advertising and gaming earnings.

Chief Strategy Officer James Mitchell said in an earnings call that Tencent would slow its pace of recruitment.

Tencent had a total workforce of more than 116,000 people at the end of March, compared with around 113,000 at the end of 2021, according to the company. Tencent said in a social media post that it plans to provide fresh graduates with over 7,000 positions this year, up from 3,000 in 2020.

Authors: GUAN CONG, QU YUNXU, DING YI, Caixin