(Yicai Global) May 18 -- Shares of Tencent Holdings fell after the Chinese internet giant’s profit fell short of expectations in the first quarter and despite revenue returning to double-digit growth.

After slumping by as much as 3.9 percent earlier today, Tencent [HKG: 0700] ended down 0.9 percent at HKD339.80 (USD43.40) a share in Hong Kong.

Net profit rose 10 percent to CNY26.4 billion (USD3.8 billion) in the three months ended March 31 from a year earlier, according to the Shenzhen-based firm’s earnings report released late yesterday. That was below the average CNY29.61 billion that analysts had forecast, per Refinitiv data.

Revenue rose 11 percent, the fastest pace in more than a year, to CNY150 billion (USD21.8 billion).

“We achieved solid revenue growth as our payment volumes benefitted from, and facilitated, domestic consumption recovery, our games revenue improved, and our advertising revenue sustained rapid growth,” said Pony Ma, Tencent’s founder, chairman, and chief executive.

Tencent’s to-business segment was the main growth engine, as income from fintech and enterprise services climbed 14 percent to CNY48.7 billion, accounting for over 30 percent of revenue for the eighth consecutive quarter.

The firm’s gaming business returned to growth in the first quarter. Revenue from the domestic and international gaming businesses rose 6 percent and 25 percent to CNY35.1 billion and CNY13.2 billion, respectively. Gaming revenue from China fell 4 percent last year because of the country’s stricter anti-addiction measures for minors.

Revenue from advertising jumped 17 percent to CNY21 billion, driven by the addition of video accounts as a new advertising revenue stream, growth in advertising activities with WeChat mini programs, and the recovery of the mobile ad network, Tencent said.

The earnings report also showed that Tencent continued to shed jobs. As of the end of March, it had 106,221 employees, versus 108,436 at the end of December and 116,213 a year earlier.

“We are investing in our artificial intelligence capabilities and cloud infrastructure to embrace the opportunities brought by foundation models, and expect AI to be a growth multiplier that enables us to better serve our users, customers, and society at large,” Ma noted.

To meet the rising demand for AI model training power, Tencent released a new generation of high-performance computing clusters last month, which are four times more efficient than the previous generation.

But competition in the cloud services market is intensifying. Alibaba Cloud, the cloud computing arm of internet giant Alibaba Group Holding, recently lowered the price of its products, prompting Tencent Cloud to announce similar cuts of up to 40 percent on a series of core products.

The price cuts will have a limited impact on Tencent, as the cloud services business accounts for less than 10 percent of total revenue, an executive said during the firm’s earnings conference call. Prices are only part of Tencent’s consideration for improving the competitiveness of cloud services, he noted.

Editors: Dou Shicong, Futura Costaglione