By Brenda Goh

SHANGHAI, (Reuters) – Tencent is one of the largest listed Chinese companies. Alibaba (NYSE:) expect to see a decline in profits and slowing growth of revenue in the July-September quarter. This is due to the one-year-long regulatory crackdown on the tech sector.

Beijing has taken back control of its internet sector. It punished well-known people for participating in market practices that were once considered commonplace and created new rules to improve how they engage customers and compete.

KGI Asia analysts stated in a last month note that they believe China’s regulatory headwinds will have a significant financial impact on earnings (third quarter), and guidance (fourth quarter).

Tencent Holdings Ltd (OTC) Ltd – The country’s biggest firm in terms of market value, and the first major tech company to announce earnings this Thursday – will report a 12% drop in its quarterly profit. This is its first fall in 2 years according to data from Refinitiv.

It is anticipated that the gaming giant will see 16.4% growth in its revenue. This pace was the slowest since the first quarter 2019. The government has imposed limits on how long minors may spend playing games. China’s gaming regulator has also not approved new games since August.

China prohibited Tencent from signing music exclusive deals during quarter.

Alibaba, China’s leading e-commerce platform, expects to report a 12 percent drop in profit for the fourth quarter. It is expected that revenue will rise by 32%. That’s the fastest increase in one year.

Alibaba posted its first quarter operating loss in two years after going public. This was following a $2.8 billion record fine.

JD, a smaller competitor (NASDAQ:) is likely to report a 71% decline in profits and slowest revenue growth over six quarters.

KGI Asia analysts believe that China’s slowing retail sales and power cuts will affect Alibaba and other smaller companies.

China’s large ecommerce enterprises are now facing increased competition from China’s short video apps Kuaishou & ByteDance’s Douyin. These apps have flourishing ecommerce businesses.

Baidu (NASDAQ : ), China’s most popular search engine, will report that its quarterly profit fell 80%. This is due to an increase in advertising revenue coming from tutoring centres, which have been banned from offering tutoring for private or commercial purposes on schools curriculums. China’s regulations on medical beauty ads have had an impact on advertising.

However, market optimism has been fueled by a slowdown in new regulatory misives. Investors will continue to monitor the situation for signs of improvement. Executives are expected to be quizzed about their expectations via conference calls.

Guo Shuqing the party chief at China’s central bank was quoted saying last month that all financial problems in China had received a positive response, and some were being resolved.