(Yicai Global) May 19 -- Shares of Tencent Holdings fell after the Chinese internet giant’s first-quarter revenue was unchanged from a year earlier and net profit plunged 51 percent, as tighter market regulation shrank income from gaming and advertising.

Tencent [HKG: 0700] closed 6.5 percent down at HKD341.80 (USD43.55), giving the Shenzhen-based company a market capitalization of HKD3.29 trillion (USD419.1 billion). The stock has fallen more than 20 percent since the start of this year.

Net profit was CNY23.4 billion (USD3.7 billion) in the three months ended March 31, as costs rose and associates swung to losses, per Tencent’s earnings report released late yesterday. Revenue was CNY135.5 billion (USD20 billion).

In an earnings conference call the same day, founder and Chief Executive Pony Ma described the quarter as “challenging.”

The company’s income in China from gaming slid 1 percent to CNY33 billion, mainly due to stricter national rules put in place in the second half of last year to stop internet addiction among minors. Advertising revenue dived 18 percent to CNY18 billion, as education, internet, and e-commerce businesses spent less on marketing, as well as the impact of new regulations.

Revenue from fintech and enterprise services rose 10 percent to CNY42.8 billion, becoming Tencent’s largest source of income and major growth engine.

The fact that regulators began issuing game title licenses again last month after an eight-month hiatus was a positive for the sector, but Tencent cannot immediately make profits from new game products, given the time-costing approval process, an executive said during the conference call.

The industry is undergoing structural changes, so Tencent may make personnel changes to focus on more profitable businesses, it added, saying that transient factors such as the Covid-19 outbreak in China would not be a reason.

Tencent’s remuneration expenses reached CNY29.2 billion in the first quarter, a jump of 43 percent from a year ago, while employee numbers climbed 30 percent to about 116,200. Based on these figures, the average monthly salary of its employees rose to at least CNY80,000 (USD11,850).

Tencent did not provide a forecast for the current quarter.

On the earnings call, President Martin Lau said “we can clearly see that from the most-senior level there’s a pretty clear signal of support released. But I think for this to translate into a real impact on our business, there’s going to be a time lag.”

His comments came after Chinese Vice Premier Liu He said on May 17 that China’s government supports the technology sector’s development and public listings by internet firms, following a year-long clampdown on the nation’s tech giants.

Editors: Dou Shicong, Futura Costaglione