AKTUELLT JUST NU

Once high-flying Chinese tech giants are now looking to scale back costs

21/8 2022 14:45

Alibaba and Tencent executives have been focusing on cutting costs across the business from headcount to exiting non-core businesses.
It comes after Alibaba and Tencent both posted a set of second quarter results that confirmed these once free-wheeling and high-flying behemoths are not growing anymore.
Alibaba and Tencent have felt the effects of a Covid-induced economic slowdown in China which is hitting areas from consumer spending to advertising budgets.

Chinese tech giants Alibaba and Tencent often talk about all of their innovations and new products during earnings calls with investors.

But the second quarter was different. Executives at China’s two largest tech firms focused on something a little less flashy — keeping costs down.

It comes after Alibaba and Tencent posted a set of second-quarter results that confirmed these once free-wheeling and high-flying behemoths are not growing anymore.

China’s biggest e-commerce player Alibaba reported flat growth for the first time ever for its April to June quarter. On Wednesday, gaming and social media giant Tencent posted its first-ever quarterly year-on-year revenue decline.

Alibaba and Tencent have felt the effects of a Covid-induced economic slowdown in China that is hitting everything from consumer spending to advertising budgets. The tightening of domestic technology regulation in areas from antitrust to gaming over the last year and a half is also weighing on results.

As revenue remains under pressure, both giants have looked to be more disciplined in their approach to spending.

“During the second quarter, we actively exited non-core businesses, tightened our marketing spending, and trimmed operating expenses,” Tencent CEO Ma Huateng, told analysts during a call Wednesday. “This enabled us to sequentially increase our earnings despite difficult revenue conditions.”