HomeTop StoriesChinese internet giant Tencent has posted its lowest annual profit since 2019

Chinese internet giant Tencent has posted its lowest annual profit since 2019

Chinese internet giant Tencent posted its lowest annual profit since 2019 on Wednesday, despite recent slight improvements in the Chinese economy and a softer attitude from regulators towards the technology sector.

Tencent’s total net profit for 2023 was 115.2 billion yuan ($16.0 billion), according to a filing of annual results with the Hong Kong Stock Exchange.

Decades of rapid growth that made China’s tech industry one of the most dynamic in the world came to an abrupt halt in 2020, when Beijing introduced stricter regulatory measures.

Authorities have since relaxed their approach to regulating the vital domestic technology sector as broader concerns about the health of China’s economy grow.

Tencent – ​​one of the world’s leading gaming companies and developer of China’s ubiquitous messaging and services app WeChat – on Wednesday announced total revenue of 609.0 billion yuan ($84.6 billion) in 2023, up 10 percent year-on-year .

The Shenzhen-based company also announced plans to increase the size of its share buyback program, more than doubling by 2024 from last year to “more than HKD 100 billion” ($12.8 billion), the filing said.

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In 2022, Tencent saw its annual profits fall 16 percent due to a new crackdown by officials on video game addiction among young people.

And despite more recent signs of strength in the sector, the regulatory hurdle for new games remains “relatively high”, Li Chengdong, founder of Beijing-based technology consultancy Dolphin, told AFP.

New games in China must first receive formal approval from authorities before being released.

The issuance of all new gaming licenses was frozen for nine months in 2021 and approvals have since not been as fast and reliable as in previous years.

“Even if (Tencent) develops new games, there is no guarantee that it can distribute them,” Li said.

Tencent and some of its domestic competitors – including Alibaba, Huawei and Baidu – are now looking to the promising field of artificial intelligence (AI).

Last September, Tencent unveiled Hunyuan, an AI-powered chatbot intended to compete with US-based ChatGPT, whose services are not accessible in China.

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In Wednesday’s filing, Hunyuan was praised as a “top-level foundational model with superior performance in numerical reasoning, logical inference and multi-turn conversations.”

But despite the push for AI, gaming still represents Tencent’s main business, Li told AFP, adding that “in the near term, revenue from AI products is not expected to cover costs.”

While many Chinese tech giants are diving into AI, Tencent remains cautious about making big moves, Beijing-based technology expert Kevin Zhou told AFP.

“(Tencent is) slower in pouring in investments and could be one or two years behind the first movers,” Zhou said.

The company is trying to strengthen its position in the video games sector by acquiring stakes in emerging studios, especially in Europe.

Founded in 1998 amid China’s rapid economic development, Tencent is a major player in the country’s technology sector as the parent company of the “super app” WeChat.

WeChat is available on most mobile phones in China, where it is used for a wide range of purposes including messaging, calling, digital payments and social media.

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