Tencent, the Chinese tech giant, has laid off over 5,000 employees and shut down parts of its business as it deals with its first sales decline in history.

In the April-June period, revenue fell 3% year on year, owing to declines in ad spending and its online gaming business.

WeChat owner (Tencent) is feeling the effects of a gaming regulatory crackdown as well as a broader economic downturn.

China’s central bank cut interest rates on Monday in an attempt to stimulate activity.

The country, which is still responding to Covid outbreaks with mass shutdowns, reported last month that its economy contracted sharply in the three months to July, indicating that it may miss its official 5.5% growth target.

In a speech on Tuesday, Chinese Premier Li Keqiang stated that China is at “the most difficult point of economic stabilization” and urged provincial leaders to increase their support for the economy.

He stated, “We must work with a sense of urgency that cannot wait in order to consolidate the foundation for economic recovery and development.”

Other companies have suffered as well, most notably e-commerce behemoth Alibaba, which reported no sales growth in its most recent investor update, a first for the company.

Since the Tencent Company’s initial public offering in Hong Kong in 2004, Tencent has been on an impressive tear of sustained growth.

It is well-known for its WeChat messaging service as well as its roster of online games, and it has become the most valuable publicly traded company in the country.

Approximately half of its revenue comes from online advertising, financial services, and business services, where the effects of the broader downturn are visible, with revenue growth from cloud and other offerings slowing sharply and ad sales falling 18%.

Since China tightened restrictions on children’s game play and halted new game approvals last year, the company has faced challenges. Even though the approval process has been restarted, none of Tencent’s games have been given the go-ahead, so the company is forced to rely on older games for the time being.

Gaming revenue was down 1% in China and its international markets, the company said in a presentation, “due to industry-wide normalization in user spending on mobile games post-COVID.”

The company announced the closure of its online education, e-commerce, and game live streaming units. Approximately 5% of its total workforce was laid off during the quarter.

“During the second quarter, we actively exited non core businesses, reduced marketing spending, and reduced operating expenses,” Tencent CEO Ma Huateng, also known as Pony Ma, said.

He added that the company was focused on “improving the efficiency” of its businesses and would be well positioned once the Chinese economy recovered.

In comparison to the previous year, total revenue was 134 billion yuan ($19.8 billion), while profits fell by 56% to 18.6 billion yuan.