Chinese technology company Tencent reported the slowest quarterly revenue growth in its history for the fourth quarter of 2021. The report comes amid the regulatory crackdowns being faced by the country’s domestic technology sector, as Beijing continues to tighten its grip. Irrespective of the declining quarterly revenue, the technology giant posted a surge in profit for the fourth quarter.
Revenue for the fourth quarter was up 8 percent year-on-year and came in at 144.18 billion Chinese yuan, the equivalent of $22.62 billion. Analysts had forecasted the company’s fourth-quarter revenue to come in at 147.6 billion yuan. Since Tencent went public in 2004, this is its slowest revenue growth.
The company reported profit attributable to equity holders of the company at 94.96 billion yuan compared to the 30.7 billion that analysts projected. The figure is up 60 percent year-on-year and is attributed to a big one-time gain the company experienced in relation to a disposal of assets.
For the year 2021, the Chinese technology giant recorded a revenue of 560.12 billion yuan. Revenue for 2021 was up 16 percent from what was recorded in 2020. Analysts had however expected yearly revenue for 2021 to come in at 566.3 billion yuan. The year 2021, therefore, was Tencent’s slowest annual revenue rate in its history.
In a statement, the Chinese titan said that “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.”
Additionally, the company lost about $470 billion in market value since it recorded its peak in early 2021. Like other technology companies, Tencent continues to face regulatory crackdowns from the country’s regulators and this has continued to pose a challenge to its operations.
Tencent’s online games category is the company’s biggest revenue driver but unfortunately, regulatory crackdowns hindered the category from reaching its full potential in 2021. For instance, regulators reduced the number of times children under eighteen years could play games last year. Authorities have also failed to give approval for the launch of new games since July and without these approvals, games cannot be released and monetized. Tencent, which is still tending to its wounds said it expects “to fully digest the impact” of the rules regarding the number of times children under 18 can play games, in the second half of this year. It also hopes to benefit from its imminent titles when the government gives the necessary approvals.
In the fourth quarter, revenue for domestic games experienced a 1 percent growth and came in at 29.6 billion yuan. In the third quarter, this category recorded a 5 percent growth.
Its international games revenue category was up 34 percent year-on-year and came in at 13.2 billion yuan, faster than the growth recorded in the third quarter. The company has been ramping efforts on its international markets as it continues to face regulatory challenges domestically.
Ad revenue for the fourth quarter came in at 21.5 billion yuan, a decrease of 13% year-on-year. This “reflected weakness in advertiser categories including education, games and Internet services,” the company said.
Revenue from its fintech and business services division ran into a total of 48 billion yuan in the fourth quarter. It, however, fell short of analysts’ expectations of 49.26 billion. The category which includes its WeChat Pay business and cloud computing unit was up 25 percent year-on-year.