China’s Tencent posts weak revenue growth, plans to double buybacks

CHINA’S Tencent Holdings posted a weaker-than-expected 7 per cent rise in fourth-quarter revenue on Wednesday (Mar 20) as its gaming revenue shrank, and said it was expecting to at least double its share buybacks this year.

The world’s largest video game company and operator of the WeChat messaging platform reported revenue of 155.19 billion yuan (S$29 billion) for the three months ended Dec 31.

That compared with the 157.2 billion yuan average of 23 analyst estimates compiled by LSEG.

Tencent’s core gaming business suffered a notable slowdown in the fourth quarter. Gaming revenue in China declined 3 per cent to 27 billion yuan, while international gaming revenue increased only 1 per cent to 13.9 billion yuan, or declined by 1 per cent when excluding currency fluctuations.

The company also said intends to at least double the size of its share repurchases from HK$49 billion (S$8.4 billion) in 2023 to over HK$100 billion in 2024. Its shares had fallen some 16 per cent over the past year to Tuesday’s close.

In a call with media, Tencent president Martin Lau said the company saw a slowdown in gaming revenue last quarter partly because many zealous gamers had already spent on their games in the first quarter last year when China moved to lift all Covid-19 restrictions.

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As a result, Lau said the company’s gaming revenue in the first quarter this year will also be soft as compared with last year.

But he said that Tencent has a pipeline of new games to boost its domestic revenue. Most notably, Lau said the company plans to release its Dungeon & Fighter Mobile in the second quarter which JPMorgan analysts estimate can bring in three to four billion yuan of revenue.

For all of last year, Tencent’s revenue rose 10 per cent to 609 billion yuan, trailing expectations of 612.2 billion yuan.

Still, this marks a year of recovery for Tencent, which reported its first annual revenue decline in 2022 as it was hit by Beijing’s sweeping crackdown on the tech sector. By comparison, it saw revenue growth in every quarter last year.

Revenue from online ads rose 21 per cent to 29.8 billion yuan as the Shenzhen-based giant continues to expand its ad distribution capability.

Revenue from fintech and business services grew 15 per cent to 54.5 billion yuan as the firm continued its expansion in those areas.

During the call, Lau also highlighted AI as a focus for Tencent. Tencent said its AI model “Hunyuan” has been scaled up to reach a trillion-parameter scale. The number of parameters is often used by the tech industry to measure the strength of a given AI model.

Lau added that a key focus for its model this year will be on improving the text-to-image and text-to-video capability.

Net income for the quarter declined 74 per cent compared with the same period last year, but the decline was attributed to Tencent’s sale of its stake in food delivery giant Meituan .

Excluding the impact of investment-related transactions, Tencent said its quarterly profit grew 44 per cent year on year to 42.68 billion yuan. REUTERS