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China's Tencent reports sluggish revenue growth, seeks to boost buybacks

People visit a booth of Tencent at the 2022 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 1, 2022

HONG KONG, March 20 (mod1s) - China's Tencent Holdings (0700.HK), opens new tab recorded a weaker-than-expected 7% gain in fourth-quarter revenue on Wednesday as its gaming income dropped, and said it was planning to at least treble its share buybacks this year.

The world's biggest video game firm and operator of the WeChat messaging platform posted sales of 155.19 billion yuan ($21.56 billion) for the three months ending Dec. 31. 

That contrasted with the 157.2 billion yuan average of 23 analyst projections provided by LSEG.Tencent's primary gaming sector experienced a substantial decline in the fourth quarter. Gaming income in China decreased 3% to 27 billion yuan, while overseas gaming revenue climbed just 1% to 13.9 billion yuan, or declined by 1% when ignoring currency swings.

The business also indicated it to at least quadruple the amount of its share repurchases from HK$49 billion in 2023 to over HK$100 billion ($12.78 billion) in 2024. Its shares had lost approximately 16% over the last year to Tuesday's closing.In a call with journalists, Tencent president Martin Lau said the business noticed a decrease in gaming income last quarter partially because many fanatical players had already spent on their games in the first quarter last year when China moved to abolish all COVID-19 restrictions.

As a consequence, Lau said the company's gaming revenue in the first quarter this year would likewise be lackluster as compared with last year. 

But he claimed that Tencent has a pipeline of new games to improve its domestic income. Most significantly, Lau said the business expects to debut its "Dungeon & Fighter Mobile" in the second quarter which JP Morgan analysts believe may bring in 3 to 4 billion yuan of sales.For all of last year, Tencent’s revenue climbed 10% to 609 billion yuan, behind projections of 612.2 billion yuan.

Still, 2019 represents a year of recovery for Tencent, which posted its first annual revenue fall in 2022 as it was rocked by Beijing’s aggressive assault on the internet industry. By contrast, it had sales increase in every quarter last year. 

Revenue from online advertisements grew 21% to 29.8 billion yuan as the Shenzhen-based behemoth continues to extend its ad distribution capacity. 

Revenue from fintech and commercial services climbed 15% to 54.5 billion yuan as the company maintained its growth in those sectors.Net income for the quarter decreased 74% compared with the same time last year, however the fall was linked to Tencent's sale of its share in food delivery company Meituan (3690.HK), opens new tab. 

Excluding the effect of investment-related activities, Tencent said its quarterly earnings climbed 44% year-on-year to 42.68 billion yuan. 

In a subsequent call with analysts, Lau was asked about China's prospective new laws on the gaming sector this year, the draft version of which caused enormous alarm in December when it was initially released by the government. 

Lau said the regulations would not hurt Tencent, adding that the market overreacted to the requirements. 

"It's no longer our concern," Lau added, "The truth is we are actually very encouraged by the supportive measures that were unleashed [by the government] after the initial concern was expressed by the market." 

He also stated users on average currently spend less on Tencent's games as compared to other items on the market. As such, if there were to be restrictions imposing limitations on player spending in video games, it would have minimal influence on Tencent's games. 

Lau also emphasized AI as a goal for Tencent. Lau added Tencent's AI model "Hunyuan", which produces top-tier Chinese language performance, has been scaled up to reach a trillion-parameter scale.

The number of parameters is widely employed by the tech sector to quantify the strength of a specific AI model. 

Lau said Tencent's advertising division would be the first to gain from the implementation of its AI model. At the same time, Tencent is also adding AI "copilot services" to products like Tencent Meeting and Tencent Docs. 

Lau noted that a primary priority for its model this year would be on enhancing the text-to-image and text-to-video capacity. 

"The next important evolution is actually what we have seen with Sora," he added, referring to OpenAI's strong AI video generator, "This is something that which we would be developing in the next turn." 

($1 = 7.1995 Chinese yuan renminbi) ($1 = 7.8230 Hong Kong dollars)


Source: https://www.reuters.com/

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