Tencent sales miss estimates
Tencent Holdings Ltd.’s revenue missed estimates, in another sign that China’s faltering economic recovery is taking a toll on its gaming and social media portfolios.
Revenue rose a less-thanexpected 7% to ¥155.2 billion ($21.6 billion) for the three months ended December, compared with the ¥157.4 billion average forecast. Net income was ¥27 billion, versus the ¥33.3 billion projected. On Wednesday, Tencent also said it was at least doubling its share buyback programme to more than HK$100 billion ($12.8 billion) in 2024.
The results cast doubt over the growth trajectory of the world’s largest internet arena, which has yet to bounce back fully from years of regulatory and economic turmoil. Investors are grappling with mixed signals about the Chinese economy, which has struggled to regain its preCovid velocity.
Beijing’s government is still contending with a plethora of structural problems from a prolonged property crisis to stubborn inflation.
Economic data released on Monday, including retail sales, suggested stimulus by policymakers has finally started to pay off.
Some of China’s biggest tech names have sought to ramp up shareholder returns after delivering mixed results.
Alibaba Group Holding Ltd. unveiled $25 billion in fresh stock repurchases following disappointing Decemberquarter sales, while JD.com Inc.’s $3 billion buyback program propelled its shares higher. Tencent’s closest gaming rival, NetEase Inc., more than doubled its dividend payout from a year ago, after both revenue and earnings missed estimates.
Analyst Robert Lea, said: “Tencent’s growth is set to normalize in 2024, though it should still deliver mid-teen earnings growth, driven by continued strength in short videos and AI-enhanced ads; underpinned by cost discipline and a stabilizing regulatory environment.”
“While Tencent continues to face medium-term structural headwinds, its revenue base is relatively well diversified, in contrast with its e-commerce peers,” he said.
Tencent faces its own challenges beyond macroeconomic uncertainties. While WeChat has proven a reliable growth driver after its shortvideo feed lured users and advertisers back from ByteDance Ltd.’s Douyin, the company still needs to figure out where the rest of its sprawling business empire is heading.
It is struggling to retain paid subscribers on its video and music streaming services, and its cloud computing arm is in the midst of a price war with Alibaba and JD, just as that unit was seeking to reach profitability.
Once its bread-and-butter, Tencent’s games division is also seeking its next big hit.
Tencent has found an unlikely ally in ByteDance. The Shenzhen-based company has scooped up some talent and in-game assets from TikTok’s Chinese owner, after ByteDance curtailed its game ambitions, Bloomberg reported.
The urgency for new gaming hits comes at a time when Beijing is again potentially ramping up scrutiny over the sector.
China is still contending with structural problems, from prolonged property crisis to stubborn inflation