Tencent reports slowest revenue growth on record as China’s regulatory headwinds remain

Tencent on Wednesday reported its slowest quarterly revenue growth on record for the fourth quarter of 2021, as the Chinese technology giant continues to feel the impact of Beijing’s regulatory tightening on the domestic technology sector.

However, the company posted a surge in profit in the fourth quarter.

Here’s how Tencent did in the fourth quarter, versus Refinitiv consensus estimates: 

• Revenue: 144.18 billion Chinese yuan ($22.62 billion) vs 147.6 billion yuan, up 8% year-on-year. That’s the slowest revenue growth since the company went public in 2004.
• Profit attributable to equity holders of the company: 94.96 billion yuan vs. 30.7 billion yuan expected. That’s up 60% year-on-year. This was thanks to a large one-time gain in relation to a disposal of assets.

For the entire 2021, Tencent brought in revenue of 560.12 billion yuan, up 16% versus 2020. Analysts had expected 566.3 billion yuan. That was the slowest yearly revenue growth rate on record.

Tencent, which has lost about $470 billion in market value since its peak in early 2021, has faced a number of headwinds resulting from China’s crackdown in areas ranging from gaming to education.

“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.

Online games is Tencent’s largest revenue driver but the segment has faced headwinds.

Last year, regulators cut the amount of time children under 18 years old could play online games for. Meanwhile, authorities haven’t approved the launch of any games since July last year. In China, games need regulatory approval to be released and monetized.

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

The company also said it will benefit from more new game launches when the government approves the release of more titles.

Domestic games revenue grew by 1% to 29.6 billion yuan, driven by Tencent’s existing games such as Honor of Kings. That was slower than than the 5% growth seen in the third quarter.

As the Chinese domestic games market faces challenges, Tencent has been increasing focus on its overseas markets. International games revenue in the December quarter came in at 13.2 billion yuan, up 34% year-on-year. That was faster than the growth seen in the previous quarter.

“We will continue to release new titles, which we expect to drive additional growth, particularly for 2023 and beyond,” Tencent said.

Last year, Beijing also cracked down on after-school education companies. That has weighed on Tencent’s ad business as education firms would buy ads with Tencent.

Ad revenue for the fourth quarter came in at 21.5 billion yuan, a decrease of 13% year-on-year.

Tencent said this “reflected weakness in advertiser categories including education, games and Internet services.”

Revenue from its fintech and businesses services division totaled 48 billion yuan in the December quarter, up 25% year-on-year, but missing estimates of 49.26 billion. This division houses Tencent’s WeChat Pay business and its fast-growing cloud computing unit.