(Yicai Global) Aug. 18 -- Chinese video game streaming giant Huya, whose planned merger with rival Douyu was derailed by regulators last month, reported a 10 percent drop in second-quarter profit from a year ago after boosting outlays on research and development, sales and marketing.

Net income fell to CNY186.3 million (USD28.8 million) in the three months ended June 30, the Tencent-backed company said in a financial statement yesterday. Revenue rose 9.8 percent to CNY2.9 million (USD447,500). It did not publish a forecast for the second half.

To promote content, products, services and Huya’s brand name, Chief Executive Rongjie Dong presided over a 46 percent jump in sales and marketing expenses in the period to CNY167 million. R&D spending climbed 15.6 percent to CNY207.9 million, mainly for higher personnel-related expenses.

“In the second quarter, we amplified our efforts to enrich content offerings and attract users, which drove steady top-line growth along with mobile user base expansion,” Dong said in an earning conference call.

The average number of mobile monthly active users rose 2.6 percent to 77.6 million, while the total number of paying users fell to 5.6 million.

Shares of Guangzhou-based Huya [NYSE:HUYA] ended flat in New York yesterday at USD8.92 each, after earlier slumping as much as 7.3 percent.

Tencent Holding’s plan to merge Huya and Douyu International Holdings, another video game streaming platform it backs, came undone on July 12 when China's State Administration for Market Regulation blocked the deal on the grounds that it would give the internet giant too much control over the sector.

“We fully respect and will abide by the SAMR decision and will comply with all regulatory requirements and conduct our businesses in accordance with the applicable laws and regulations,” Dong said.

Douyu’s net loss widened 78 percent in the second quarter to CNY181.7 million (USD28 million), compared with a deficit of CNY101.8 million in the first quarter, its financial results showed two days ago. Revenue fell 6.8 percent to CNY2.34 billion (USD362 million) from a year earlier.

Editor: Futura Costaglione