Tencent’s Q4 earnings: fintech and businesses services division emerges as biggest revenue driver

March 23, 2022 0 Comments

Tencent reported its earnings on Wednesday, with quarterly and annual revenue growth both hitting a record low, as the Chinese technology giant continues to feel the impact of Beijing’s regulatory tightening on the internet sector.

Revenue for the fourth quarter was 144.18 billion yuan ($22.63 billion) compared to 147.6 billion yuan in the previous year, an increase of 8% year on year. This is the company’s slowest revenue growth since it went public in 2004.

For the full year of 2021, Tencent’s revenue was 560.12 billion yuan ($87.90 billion), an increase of 16% over 2020 and slightly lower than analysts’ forecast of 566.3 billion yuan. This is the slowest annual revenue growth rate on record.

Despite a weaker-than-expected revenue growth, the company posted a surge in profit in the fourth quarter.

The profit attributable to the company’s shareholders was 94.96 billion yuan ($14.90 billion), above the predicted 30.7 billion yuan and representing a year-on-year rise of 60%. 

This rise was mostly due to a large one-time gain in relation to a disposal of assets. During the quarter, the company sold its stake in Chinese e-commerce giant JD.com and trimmed its stake in Southeast Asian e-commerce and gaming company Sea Limited.

For the first time, its fintech and businesses services division surpassed the online game business, becoming the biggest revenue driver.

Revenue from its fintech and businesses services division, which includes WeChat Pay business and cloud computing unit, totaled 48 billion yuan ($7.53 billion) in the fourth quarter, increasing 25% year on year but falling short of expectations of 49.26 billion yuan.

Revenue contributed by gaming unit was 42.8 billion yuan ($6.72 billion), up 7% from a year earlier.

The Chinese gaming giant has been facing headwinds since regulators stepped up oversight of the domestic gaming industry. Last year, regulators cut the amount of time children under 18 years old could play online games for. Meanwhile, as authorities have not approved any game launch since July last year, Tencent has to count on existing games to generate cash flow in domestic market.

The company said it expects “to fully digest the impact” of the rules on under 18s in the second half of 2022.

Domestic gaming revenue rose only 1% to 29.6 billion yuan in the fourth quarter, compared with a 5% increase in the previous quarter. But the good news is that international gaming revenue rose 34% year over year to $13.2 billion in the quarter. 

Ad revenue for the quarter was 21.5 billion yuan, a 13% decline year on year. Tencent attributed this to “weakness in advertiser categories such as education, games and internet services.”

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

“Despite financial headwinds, we continued to make strategic headway, including driving widespread adoption of our enterprise software and productivity tools, increasing content creation and consumption in our video accounts, and expanding our international games business. We believe the China internet industry is structurally shifting to a healthier mode characterized by a re-focus on user value, technology innovation, and social responsibility.”

Cover image from 大神 on Unsplash

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