Tencent Holdings Ltd.’s revenue growth in the first quarter slowed to its weakest pace in nearly two decades, as China’s pandemic resurgence hit the Chinese social-media and videogame behemoth, which was already struggling with a yearlong regulatory crackdown.

The world’s largest videogame developer said Wednesday that revenue edged 0.1% higher from a year earlier to 135.47 billion yuan, equivalent to $20.11 billion. Its net profit fell 51% to CNY23.41 billion.

Both measures missed expectations of analysts polled by FactSet and marked a further deterioration from the final quarter of 2021, when several Chinese technology giants including Tencent
700,
-0.76%

and Alibaba Group Holding Ltd.
BABA,
+6.37%

posted their worst top-line growth since going public.

The slowdown was primarily due to a 1% revenue decline from Tencent’s domestic games business, one of the tech giant’s largest income streams. The company attributed the drop to “direct and indirect effects of the minor protection measures” that affected active-user and paying-user counts.

Chinese authorities have reined in the gaming industry with measures such as limiting online gaming time for youths. Beijing also suspended new videogame approvals for months before finally resuming granting licenses in April.

Revenue from online advertising, another key business segment, fell 18%. China’s wide-ranging regulatory actions and slowing economy have weighed on demand from advertisers across industries, particularly those in the after-school-tutoring and internet-services sectors.

Sharply higher costs, such as a 41% jump in general and administrative expenses, further hit Tencent’s bottom line. The company said the cost increase was “due to higher share-based compensation expenses, R&D expenses and staff costs” from new investments and overseas subsidiaries.

Tencent said “overall advertising sentiment remained weak” for the second quarter so far.

Advertisers in categories such as fast-moving consumer goods, e-commerce and travel have reduced their spending significantly, Tencent said, calling the situation a “difficult market environment.”

Write to Yifan Wang at [email protected]

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