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China Internet heavyweight Tencent said on Wednesday net profit fell by more than half in the first three months of the year and revenue was flat as a surge of Covid in the country hit individual and businesses users.

Net profit was 23.4 billion yuan, or $3.5 billion compared with 48.8 billion yuan a year ago. Revenue as little changed at 135.4 billion yuan compared with 135.3 billion yuan in the first three months of 2021.

The company’s shares lost nearly 7% in U.S. over the counter trading today. Its quarterly earnings report was released after the close of trading at the Hong Kong Stock Exchange on Wednesday. Tencent’s shares have most more than of their value there since February 2021.

“During the challenging first quarter of 2022, we implemented cost control initiatives and rationalized certain non-core businesses, which would enable us to achieve a more optimized cost structure going forward,” Shenzhen-headquartered Tencent said.

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The company said it utilized mini programs, Tencent Meeting, and WeCom and other tools “to help enterprises and consumers weather the resurgence of Covid-19 in China,” It plans to continue “investing in strategic growth areas including enterprise software, Video Accounts and international games.”

Tencent is facing pressure to innovate in part its massive user base within China is reaching limits. The number users of WeChat and Weixin, its popular social platform, rose by 3.8% from a year earlier to 1.28 billion in the first quarter — not far from China’s 1.4 billion population.

The company’s vast investments include KE Holding, Kuaishou and Zhihu, as well as Riot Games, Epic Games, Activision and Supercell.

Chairman Ma Huateng has a fortune worth $38.6 billion on the Forbes Real-Time Billionaires List today.

Click here for Tencent’s quarterly report.

@rflannerychina

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