Tencent Twin Skyscrapers in Shenzhen Bay Start Up Plaza in Nanshan Business District.

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On Wednesday, Tencent reported the slowest quarterly revenue growth in history for the fourth quarter of 2021 as the Chinese technology giant continues to feel the impact of tightening Beijing regulations on the domestic technology sector.

However, in the fourth quarter the company recorded profit growth.

Here’s how Tencent did in the fourth quarter compared to Refinitiv’s consensus estimates:

  • Income: 144.18 billion Chinese yuan ($ 22.62 billion) against 147.6 billion yuan, up 8% from the same period last year. This is the slowest revenue growth since the company opened in 2004.
  • Profit attributable to shareholders of the company: 94.96 billion yuan against the expected 30.7 billion yuan. This is 60% more than the same period last year. This was due to a large one-time proceeds from the disposal of assets.

For the whole of 2021, Tencent’s revenue was 560.12 billion yuan, up 16% from 2020. Analysts expected 566.3 billion yuan. It was the slowest annual revenue growth rate of all time.

Tencent, which has lost about $ 470 billion in market value since its peak in early 2021, has faced a series of countermeasures as a result of China’s repression in a variety of fields, from games to education.

“2021 was a difficult year in which we adopted changes and implemented certain measures that strengthened the company’s long-term sustainability, but led to a slowdown in our revenue growth,” Tencent said in a statement.

The growth of international games

Online games are Tencent’s biggest revenue driver, but this segment has faced a headwind.

Last year, regulators reduced the amount of time children under 18 can play online games. Meanwhile, the authorities have not approved the launch of any game since July last year. In China, the release and monetization of games requires the approval of regulators.

Tencent said it expects to “fully digest the impact” of the rules on children under 18 in the second half of 2022.

The company has also said it will benefit from new game launches if the government approves the release of more titles.

Domestic gaming revenue rose 1% to 29.6 billion yuan, thanks to existing Tencent games such as Honor of Kings. It was slower than 5% growth in the third quarter.

As the Chinese domestic gaming market faces challenges, Tencent is increasingly focusing on its overseas markets. Revenue from the International Games in the December quarter was 13.2 billion yuan, up 34% from the same period last year. This was faster than the growth in the previous quarter.

“We will continue to release new titles that we expect will stimulate further growth, especially in 2023 and beyond,” Tencent said.

Advertising under pressure

Last year, Beijing also cracked down on post-secondary education companies. This has affected Tencent’s advertising business as educational firms buy advertising from Tencent.

Advertising revenue for the fourth quarter was 21.5 billion yuan, down 13% from the same period last year.

Tencent said it “reflected the weakness of advertiser categories, including education, games and online services.”

In the December quarter, revenue from the fintech and business services division was 48 billion yuan, up 25% from the same period last year, but there are no estimates of 49.26 billion. In this division is the division of Tencent WeChat Pay and its fast-growing block of cloud computing.

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