On Thursday morning, Chinese IT giants’ stocks plummeted after Tencent posted disappointing earnings, fueling fears of a bleak earnings season as China’s economic outlook worsened.

Tencent’s Hong Kong-listed shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.

Tech behemoth Alibaba dropped more than six percent, while Baidu and Xiaomi were both down.

Tencent’s revenue came in at 135.5 billion yuan ($20.1 billion) for the three months ended March, putting year-on-year growth at nearly zero and setting a record low for the company’s quarterly revenue gain.

Xiaomi is expected to report first-quarter results later on Thursday, while Alibaba and Baidu will do so next week.

The sell-off came despite Chinese leaders recently hinting that an 18-month regulatory crackdown on the tech sector may ease.

Premier Li Keqiang on Wednesday expressed support for digital-economy companies and their public listings, according to state broadcaster CCTV.

But in a conference call with reporters after announcing the results, Tencent president Martin Lau warned that Beijing’s latest show of support for the tech sector would take time to bear fruit.

“We can clearly see that from the most senior level, there’s a pretty clear signal of support released. But for this to translate into real impact on our business, there is going to be a time lag,” Lau said, according to Bloomberg.

“It would take the specific regulators and ministries to translate this direction into real action.”

“The process of confidence building… will take time,” said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.

This is due to “the past two years of regulatory uncertainty for China’s tech sector, including significant regulatory penalties upon some of China’s largest tech firms”, he told AFP.

Meanwhile, China still has a principle of “common prosperity”, suggesting tech firms will continue to remain under scrutiny even if regulatory moves may be less dramatic, said Zhaopeng Xing of ANZ Research.

China’s rapid growth over the past four decades has led to yawning inequalities, and Beijing’s recent moves have involved cracking down on firms holding big monopolies.

“I don’t think the policy direction has been changed,” Xing added.

Companies also face challenges from China’s weak economic performance, analysts say, with retail sales plunging in April and supply chains snarling as cities including key business hub Shanghai imposed movement curbs to stamp out Covid-19.

China is the last major global economy to stick to a rigid zero-Covid policy, which has led to millions being locked down in Shanghai for more than a month as the virus spread.

Top Tencent executives told Bloomberg that Shanghai’s lockdown has wiped out commercial payments and may reduce advertising spending in the current quarter.