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Shares of the Chinese internet company declined following its disappointing second-quarter earnings report, which fell short of market expectations after a strong first quarter. The stock closed 3.7% lower at HKD 200.20 ($25.60) in Hong Kong, while its shares listed in New York dropped 3.9% to $129.67 yesterday. Both stocks reached new peak levels on July 23.
The company’s net profit for the second quarter was CNY 8.6 billion ($1.2 billion), marking a 26% increase compared to the same period last year but a 17% decrease from the previous quarter. Revenue rose 9% year-over-year to CNY 27.9 billion ($3.9 billion) but declined 3% from the prior quarter.
Following a surprisingly strong first quarter, analysts had heightened their expectations for the company’s second-quarter performance. However, the results ultimately did not meet those heightened expectations. In the first quarter, the company reported net profit of CNY 10.3 billion and revenue of CNY 28.8 billion, representing increases of 35% and 7%, respectively, with market forecasts at CNY 28.5 billion in revenue.
Revenue from gaming and related value-added services increased 14% year-over-year to CNY 22.8 billion in the quarter ending June 30, driven mainly by the successful performance of mobile game Identity V and new titles such as Where Winds Meet and Marvel Rivals. Despite this, the figure fell 5% from the previous quarter.
One of this year’s flagship titles, Where Winds Meet, has shown consistent growth, surpassing initial expectations in player engagement and monetization, according to the CEO during the earnings call.
The company has been investing heavily in artificial intelligence technology, which has already produced significant results in product development and operations. The CEO indicated that AI will play an increasingly vital role in creating more immersive and captivating gaming experiences in the future.
The online education segment reported revenue of CNY 1.4 billion, a 7% increase from the previous period. Revenue from the online music platform, Cloud Music, decreased 4% to CNY 2 billion, while revenue from innovative and other business segments dropped 18% to CNY 1.7 billion.
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