After its staff shrunk by about 5%, Tencent Holdings Ltd. reported its first-ever revenue decline, highlighting the extent to which China's deteriorating economy is harming the country's largest firms.

The most valuable firm in the nation experienced its first quarterly decline in staffing since 2014 as the WeChat operator was finally affected by layoffs reverberating through the global internet sector. In the June quarter, revenue decreased by more than expected, falling 3% more than expected to 134 billion yuan ($19.8 billion), while net income also fell short of expectations, falling 56% to 18.6 billion yuan.

Due to a real estate recession and sporadic coronavirus lockdowns from Shanghai to Shenzhen, Tencent is currently dealing with a worsening slowdown in the world's No. 2 economy. Businesses in the advertising, cloud computing and gaming industries are all suffering due to uncertainty. This month, Alibaba Group Holding Ltd. disclosed its first quarterly revenue decline in company history, while the outcomes were better than anticipated.

After a decade of unrestrained growth, China's massive internet industry had already accepted a new age of steady growth before the macroeconomic upheaval. After a broad government crackdown reduced their total market value by more than $1 trillion in 2021, businesses like Tencent are putting more emphasis on profitability than on the market-grab of the past.

There were some promising signs. The quarter saw a record 18% decline in online advertising revenue, but this was better than expected. Additionally, the adjusted net income of 28.1 billion yuan exceeded forecasts by nearly 15%. In Europe, shares of Prosus NV, one of Tencent's largest sponsors, fell by more than 1%.

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