May 20, 2022

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Chinese giant records slowest revenue growth ever

Chinese giant records slowest revenue growth ever

Twin skyscrapers by Tencent at Shenzhen Bay Start Up Plaza in Nanshan business district.

Nikada | Getty Images

Tencent On Wednesday, it reported the slowest quarterly growth in revenue recorded for the fourth quarter of 2021, as the Chinese tech giant continues to feel the impact of Beijing’s regulatory tightening on the domestic tech sector.

However, the company reported an increase in profits in the fourth quarter.

Here’s how Tencent performed in the fourth quarter, versus Refinitiv’s consensus estimates:

  • Revenues: 144.18 billion Chinese yuan ($22.62 billion) versus 147.6 billion yuan, up 8% year on year. This is the slowest revenue growth since the company went public in 2004.
  • Profit attributable to the shareholders of the company: 94.96 billion yuan, versus 30.7 billion yuan expected. This represents a 60% increase year-over-year. This was thanks to a huge one-off gain in terms of asset disposal.

For the whole of 2021, Tencent generated revenue of 560.12 billion yuan, an increase of 16% compared to 2020. Analysts had expected 566.3 billion yuan. This was the slowest annual revenue growth rate ever.

Tencent, which has lost about $470 billion in market value since its peak in early 2021, has faced a number of headwinds from China’s crackdown in areas ranging from gaming to education.

“2021 was a challenging year as we embraced changes and implemented some actions that enhanced the company’s long-term sustainability, but had the effect of slowing our revenue growth,” Tencent said in a statement.

International Games Growth

Online gaming is Tencent’s biggest revenue driver, but the sector has faced headwinds.

last year’s organizers cut off the amount of time Children under the age of 18 can play online games for. Meanwhile, the authorities have not approved the release of any games since July last year. In China, games need regulatory approval to be released and monetized.

Tencent said it expects to “absorb the impact” of the rules on people under 18 in the second half of 2022.

The company also said that it will benefit from more new game launches when the government approves the release of more games.

Domestic gaming revenue grew 1% to 29.6 billion yuan, driven by existing Tencent games such as Honor of Kings. That was slower than the 5% growth in the third quarter.

As the Chinese domestic gaming market faces challenges, Tencent is increasing focus on its overseas markets. International gaming revenue in the December quarter was 13.2 billion yuan, up 34% year on year. That was faster than the growth seen in the previous quarter.

“We will continue to release new titles, which we expect to drive additional growth, particularly for 2023 and beyond,” Tencent said.

Advertising under pressure

Last year, Beijing also Strict action has been taken against after school education companies. This has affected Tencent’s advertising business as education companies will buy advertising from Tencent.

Advertising revenue for the fourth quarter was 21.5 billion yuan, down 13% year on year.

Tencent said this “reflects weakness in advertiser categories including education, gaming and internet services”.

Total revenue from the fintech and business services division came to 48 billion yuan in the December quarter, up 25% year-on-year, but it missed estimates at 49.26 billion. This division includes Tencent’s WeChat Pay business and its rapidly growing cloud computing unit.

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