Tencent’s annual and quarterly results miss estimates amid weaker video gaming sales

For the full year, Tencent posted a net income of 115.2 billion yuan, down 39 per cent from 2022 and missing expectations of 123.5 billion yuan. Annual revenue grew 10 per cent to 609 billion yuan, slightly below analysts’ estimates of 612.7 billion yuan.

The Shenzhen-based company proposed the payment of a final dividend of HK$3.4 per share for 2023, up 42 per cent from 2022. It said it intends to at least double the size of its share repurchases from HK$49 billion in 2023 to over HK$100 billion this year.

Tencent is navigating macroeconomic and regulatory uncertainties amid China’s slow post-pandemic recovery.

At an annual meeting in January, Ma urged employees at the 26-year-old company to search for new opportunities in its video gaming and social media operations, calling on WeChat to grow because “an old tree should put forth new buds”, and asking the gaming business to step up international expansion.

Tencent’s shares closed at HK$288.8 on Wednesday ahead of the earnings announcement, up 1.33 per cent.

The stock has fluctuated after the Chinese video gaming regulator proposed last December to restrict spending in games, triggering a market sell-off in the sector. Sentiment improved after mainland authorities withdrew the plan and approved more new video games than usual.

Tencent was granted a licence in January for a mobile game developed in collaboration with the NBA.

The regulatory outlook for China’s internet sector is expected to stabilise in 2024, with the since-retracted gaming rules in late 2023 unlikely to pose a material impact to Tencent, according to a research note by Bloomberg Intelligence this week.

“Beijing remains broadly supportive of the internet sector … viewing Tencent and its peers as stalwarts of China’s economic growth,” analysts Robert Lea and Jasmine Lyu wrote.

But heightened competition in the video gaming sector could weigh on Tencent’s future growth, according to Shawn Yang, senior equity analyst at consultancy Arete Research.

“Tencent currently holds the largest gaming market share in China, [but] with batches of new games from various genres being introduced to the market, it remains to be seen whether these new additions will cannibalise the share of some of Tencent’s popular legacy games, such as Honour of Kings and Peacekeeper Elite,” Yang said.

Tencent’s recent acquisitions and investments are expected to facilitate the development of high-quality, domestically produced titles, according to Zhang Shule, gaming industry analyst at CBJ Think Tank.

“This will also enable the firm to introduce new titles that are on par with its popular Honour of Kings and Peacekeeper Elite,” Zhang said, adding the company is poised to become a prominent developer of premium games, in addition to being a top earner in the video gaming industry.