Shares of Chinese technology conglomerate Tencent (TCEHY) are dropping precipitously on Wednesday after reporting its first profit drop in over a decade.

QUARTERLY RESULTS: Tencent said that its net income for the second quarter was 17.9B yuan, or $2.6B, a drop of 2% versus the same period in 2017. According to Bloomberg the firm’s net income was “well short of the 19.3B-yuan average of analysts’ estimates and reflects fading allure of older titles, increased spending and fewer investment gains”. Revenue for the quarter increased 30% year-on-year to 73.7B yuan, or $10.7B, driven primarily by payment-related services, digital content subscriptions and sales, social and others advertising, and smartphone games. Mobile gaming revenue fell 19% sequentially in Q2.

CHINA FREEZE ON NEW GAMES: Regulators in China have frozen approval of gaming licenses amid a government overhaul, according to a Bloomberg report out on Tuesday. The freeze comes after a restructuring of power among departments in the government and an emphasized concern of violence and gambling in some games. The whole sector has been negatively affected, with publishers like Tencent shedding $150B in market value and smaller publishers struggling to keep up without releasing new titles. Amid consolidation, The National Radio and Television Administration has not granted licenses for about four months, while the Ministry of Culture and Tourism has made registration procedures more strict.

REVENUE GROWTH CONCERNS: According to media reports, Martin Lau, the president of Tencent said, “From a revenue growth perspective, gaming is a key area of weakness, our biggest game is not monetizable…This is something that’s a little out of our control, but over time we’ll solve it”. 

PRICE ACTION: Tencent is down almost 7%, or $2.92, to $41.23 per ADR in afternoon trading in New York.

OTHER CHINESE INTERNET STOCKS FALL: Shares of other China-based internet companies, including JD.com (JD), IQiyi (IQ), Alibaba (BABA), Weibo (WB), Baidu (BIDU), and Renren (RENN), are also lower in afternoon trading.

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