Tencent returns to growth as China recovers from Covid lockdowns

Chinese technology group Tencent reversed two consecutive quarterly revenue declines and said it was “well positioned” to benefit from the end of the country’s zero-Covid policy.

The technology group posted quarterly revenue of 145 billion yuan ($21 billion) in the three months to December, up 0.5 percent from a year earlier and in line with analyst forecasts. Tencent’s net profit rose 19 percent to 29.7 billion yuan, slightly beating analysts’ estimates.

Chief Executive Pony Ma struck an upbeat note on Wednesday, saying the company was in a position to “benefit” from the “resurgence in China.”[’s] The economic growth that our users’ activity indicates is happening now”.

The company’s sales were subdued until the end of 2022 as China emerged from zero Covid restrictions, but the fintech arm has since seen “double-digit growth” in the first quarter of this year as consumers returned to stores as China reopened.

His upbeat tone today came after Beijing told investors it was easing regulatory pressure on internet giants to boost growth.

Tencent, China’s most valuable company by market capitalization, is winding down its internet empire after regulators pressured it to reduce its footprint as part of a broader antitrust crackdown. In its previous financial results in November, Tencent announced it would divest most of its $22 billion stake in delivery service Meituan to generate a dividend for shareholders. At the end of 2022, the value of Tencent’s shares in the companies listed in its portfolio was 84 billion dollars.

“In 2022, we did a good job of reducing costs and increasing efficiency. We will continue in this direction in 2023. You need to reduce fat and increase muscle,” said Ma.

Tencent has increased its investment in Channels, the short-form video feature embedded in its ubiquitous WeChat superapp, after falling behind the growing popularity of ByteDance’s Douyin platform, TikTok’s sister app. The company said on Wednesday that as a result of this investment, time spent on WeChat video accounts tripled in 2022 compared to the previous year.

While Tencent’s domestic game revenue fell 6 percent to RMB 27.9 billion, acquisitions of overseas game studios boosted international game revenue by 5 percent to RMB 13.9 billion, driven by the success of the popular game. Brave and League of Legends franchises.

“Games growth was solid, and better-than-expected fourth-quarter billings growth should bode well for earnings in early 2023,” said Robin Zhu, China internet analyst at Bernstein. He added that there was a “positive trajectory” in Tencent’s overseas games, despite the sector’s revenue falling in the fourth quarter due to currency headwinds.

Tencent bought back RMB 12 billion of shares in the fourth quarter.

It also announced that its chairman and chief business officer, Martin Lau, will step down from the board at this year’s annual meeting, but will remain chairman and chairman of the investment committee.