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Tencent posts first revenue decline since IPO

Yahoo Finance's Brian Sozzi and Brad Smith discuss Tencent earnings and how the stock is trading just after the opening bell.

Video Transcript

BRAD SMITH: Guys, we're approaching the start of today's trading activity just a few seconds away. We're going to go live to the floor of the New York Stock Exchange. Major averages in the red right now. We'll see where things open up.

[MUSIC PLAYING]

Rowdy bunch there at the New York Stock Exchange. Pioneer Natural Resources ringing the opening bell as we kick off today's trading activity on this Wednesday, August 17th here. We were pointing lower here to begin today's trading activity. We did get retail sales figures out this morning. We'll dive back into that on a hot moment, virtually unchanged though. The Dow opens lower by about 7/10 of a percent, 3/4 of a percent there, 251 points in the red. S&P 500, you're also seeing that open lower by about 8/10 of a percent.

And the NASDAQ composite, you're seeing that down right now at the onset of today's trading activity, just after the opening cross down by about 1%, 128 points in the red there. Let's also talk some Tencent holdings. Seeing some pain in it's latest quarter with revenue missing estimates, noting a decrease of 3% year-over-year. However, despite difficult revenue conditions, Chinese social media and video game giant saw a beat on earnings here. Earnings galore this morning as we were taking a look--

BRIAN SOZZI: So many--

BRAD SMITH: --taking a look at some of the retail names a moment ago. Tencent is actually just barely higher by the hair on its chinny chin chin.

BRIAN SOZZI: Surprising.

BRAD SMITH: And that's after the company had actually seen during the second quarter exiting of non-core businesses, tightening their marketing spending, trimming some of the operating expenses, that coming from the chairman and CEO of Tencent. And it's worth noting that this is the first time that they've seen a year-over-year revenue decline for a quarter. Of course, there were some regulations in China. It was a tougher period to navigate through.

BRIAN SOZZI: Yeah. That's another tech focused business being hurt by the pullback in online advertising. I think that's how you would summarize this quarter. Some of the double digit drops in sales that they saw was-- were startling. And, you know, you mentioned the stock price there. Brad, I'm surprised it knocked down even more.

BRAD SMITH: Yeah. I mean, taking a look at the actual versus the estimates there on the screen a moment ago for Tencent, there's so much to this business to really understand. And sometimes I have to remind myself all of the things that they are really involved in. They're going to actually focus on enhancing the efficiency of their business. They're saying launching new revenue initiatives, in-feed advertisements, video accounts, continuing to drive some innovation that they're noting through research and development, and they're going to generate approximately half of their revenues from the financial tech and business services, as well as online advertising.

So this kind of a transformative period, if you will, is where they're going to lean into the highest margin businesses. And we'll see where some of the trimming of the excess that they were mentioning and the exiting of non-core businesses actually nets out in the future too.

BRIAN SOZZI: We wish them well in their journey.

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