Tencent’s revenue grows at slowest pace in nearly two decades
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2 min read . Updated: 23 Mar 2022, 06:02 PM IST China’s restrictions on youth gaming and the internet industry impact advertising and videogame revenue
SINGAPORE : Tencent Holdings Ltd., the Chinese social-media and videogame behemoth, said its revenue in the fourth quarter slowed to its weakest pace in nearly two decades, as a yearlong regulatory crackdown on China’s technology sector and weakening consumption weighed on sales.
The world’s largest videogame developer said Wednesday revenue for the October-to-December period rose 7.9% to 144.19 billion yuan, equivalent to $22.65 billion. That missed expectations of analysts polled by FactSet and marked the company’s worst top-line growth since it went public in 2004.
Tencent Chief Executive Officer Pony Ma told reporters in a call on Wednesday that 2021 was a challenging year for the company, as Tencent sought to adapt to a tougher regulatory environment and structural changes to China’s internet industry.
Last year, Beijing released a raft of regulations seeking to diminish the influence of its largest internet companies and increase competition in the consumer-internet space. Tencent was largely spared the massive fines slapped on its peers Alibaba Group Holding Ltd. and Meituan, but the Shenzhen-based technology company was hit by new restrictions in the gaming sector.
Chinese authorities introduced strict rules last August limiting the time minors’ could spend playing videogames to curb videogame addiction, and what officials view as responsible for a host of societal ills, including distracting young people from school and family responsibilities.
Tencent, which gets a large part of its sales from videogames, said growth in its domestic games revenue weakened to 1%, while revenue from another key business segment, online advertising, fell 13%, as China’s wide-ranging regulatory actions last year hurt demand from advertisers across industries, particularly those in the after-school-tutoring and internet-services sectors.
Still, net profit jumped 60% to 94.96 billion yuan, mainly driven by gains of about 86 billion yuan from Tencent’s recent sale of its stakes in investee companies including Chinese e-commerce firm JD.com Inc.
Revenue from Tencent’s fintech and business services, which include its cloud business, grew 25% to 48 billion yuan. Tencent said it would be shifting the focus of its cloud operations from “revenue growth at all costs" to improving its margins.
Tencent President Martin Lau said the company expects operations to improve in the second half of the year, as its advertising business resumes growth and as Chinese authorities resume the approval process for new games after dealing with the issue of youth videogame addiction. “We believe the regulators are still supportive of the gaming industry," Mr. Lau said Wednesday.
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