Tencent maintains cost-cutting measures amid first drop in annual revenue

Tencent Holdings on Thursday said it would limit its focus on its core business, while maintaining cost-cutting and improving efficiency, as it reported a drop in annual revenue for the first time. hitherto.

The world’s largest video game company and operator of WeChat The messaging platform posted revenue of 554.55 billion Yuan (nearly Rs 6,65,600) for 2022, down 1% from a year earlier, after China’s economy slowed down due to the pandemic and a protracted regulatory crackdown has dented profits.

Tencent Chairman and CEO Pony Ma told reporters during a meeting that the company will focus this year on tapping into more of its existing core businesses, rather than “trying to do it.” everything” and operate in the “red ocean market”, where competition is fierce.

“We hope that our entire technology and business management team will be more focused,” he said. “I think this is very important because we can see that focusing and making breakthroughs is very important for overall development.”

The business outlook is uncertain in the world’s largest gaming market after two years of regulatory crackdown, but the sector’s participants hope for a rebound as regulators have resumed licensing. publishing license since late last year after a month-long freeze.

Unlike in most other countries, video games require regulatory approval before being released in China.

The crackdown has changed the operating environment of China’s tech giants as regulators tighten oversight of companies’ proprietary behavior and handling of user information.

Martin Lau, the company’s president, said on a later call with analysts that regulations were being normalized and support for platform companies would improve this year.

“[Chinese president Xi Jinping recently] referring to supporting platform companies to demonstrate their capabilities, create jobs, promote consumption and compete internationally,” he said, “the Prime Minister also emphasized that the private sector will have significant potential in the Chinese economy.”

Advertising business begins

Help offset losses in domestic and fintech gaming, TencentGoogle’s online advertising business showed a surprisingly strong recovery in the fourth quarter, with revenue for this segment up 15% and contributing to a 1% increase in the group’s total revenue. in the quarter ending in December.

China’s city blockade increased in the weeks to early December as the country abruptly ended its COVID-free policy, triggering a wave of infections, severely disrupting the economy and causing many to suffer. people killed.

Charlie Chai, an analyst with 86Research, said Tencent’s performance was overall “warm”, but the advertising segment “has weathered the COVID-19 challenge and delivered outstanding growth in the industry”.

During the media call, Lau also talked about the company’s forays into manufacturing artificial intelligencehas seen a surge in global interest, fueled by the popularity of Microsoftboot supported openAI‘s chatbot ChatGPT.

Reuters reported last month that Tencent is working on a ChatGPT-like chatbot called “HunyuanAide” that will incorporate Tencent’s Hunyuan AI model.

Lau said the company is rapidly developing its proprietary platform model Hunyuan and plans to gradually roll out its own AI platform models.

Tencent’s chief strategy officer, James Mitchell, said that Tencent is willing to bear the heavy costs associated with training AI models even though it is focusing on cutting costs in other areas.

In October, the US announced controls on exports of high-end computer chips to China to try to stem AI development in the country, but Mr. Mitchell said Tencent has enough chips ready to go. develop its AI models.

© Thomson Reuters 2023

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