"This is something which is a little bit out of (our) control", said Martin Lau, the company president.
In its earnings release, the company said: "In China, DAU [daily active users] for our smartphone games grew at a double-digit rate year-on-year, but monetisation per user declined as users shifted time to non-monetised tactical tournament games". Like all gaming companies in China, Tencent has been waiting government approvals for games since March, after a regulatory reform.
Procedures for games approvals in China were already complicated enough with watchdogs for media publication, cyberspace and copyright as well as ministries for culture and information technology all being part of the process.
He said the block follows concern over Tencent's ability to monetise popular game PlayerUnknown Battleground (PUBG), which it was forced to alter a year ago after the regulator branded it too gory and violent.
Tencent's Hong Kong-listed shares closed down 3.6 percent to HK$336 ahead of the release of its quarterly results on August 15. "We do believe it's not a matter of whether these games will be approved for monetization, but a matter of when".
Beijing's move to halt approvals for game licenses has hit shares of video game companies across Asia and in the United States.
This is not the first time Tencent has found itself at crossroads with China's gaming authorities. The longer China's game license freeze continues, the more adverse the potential impact on the companies that occupy the country's now isolated industry.
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Now it has been a while since this the regulator took this step and by now some of the major companies in the Chinese Gaming Industry alongside worldwide companies, have started to feel the heat. China surpassed the U.S.to become the world's largest game market in 2016 and many American, Japanese and Korean game publishers rely on Tencent to distribute their games in the country.
"The regulatory headwind is definitely having a toll" on Tencent's gaming revenue, said John Choi, an analyst at Daiwa Capital Markets, noting that the company has not been able to monetize a key title such as PUBG.
Despite being a homegrown Chinese product with huge popularity, the country's government has criticized the game for being addictive to children.
Tencent still hasn't received full approval to introduce desktop versions for PUBG and "Fortnite".
Other gaming shares were hit in the wake of Tencent's downbeat results, including Chinese rival NetEase which lost 4 percent while Japan's Capcom, which developed "Monster Hunter:World" tumbled 5 percent. Lau said this showed the regulators' goodwill.
"We don't think that the regulation will impact the sector forever", he said.