Tencent no longer believes that betting on the virtual reality (VR) market will pay off, and has scrapped plans to start developing its own VR hardware.

That's according to a report from Reuters, which explains that a changing economic climate and tightening regulations in China have resulted in Tencent tempering its VR ambitions.

Sources speaking to the publication claim that Tencent had been working on an extended reality (XR) project, but suggested the company didn't expect it to become profitable until at least 2027.

That outlook, along with what another source claimed was a lack of promising games and non-gaming applications, prompted Tencent to rethink and ultimately downsize its VR ambitions.

The company's nascent XR unit was only opened in June 2022 and had swelled to 300 staffers, but one source claims the bulk of those workers have now been told to move on–although Tencent has stated the unit hasn't been completely disbanded.

"Under the company's new strategy as a whole, [those VR plans] no longer quite fit in," said one source, speaking to Reuters.

Earlier this year, a report from the South China Morning Post indicated the Chinese government is (again) looking to tighten restrictions on video games to protect minors and stem addiction.

Officials in the region previously imposed various playtime restrictions on those under the age of 18 to protect their "physical and mental health," which also resulted in developers and publishers being forced to comply with those changing rules.

It remains to be seen whether more restrictions will be rolled out, but Ao Ran, the secretary general for China's Audio-Video and Digital Publishing Association, is reportedly keen on the idea of unspooling more red tape.