Tencent, the Massive Chinese Internet Company, Reports Its Lowest Yearly earnings Since 2019

Even though China’s economy has recently shown some signs of growth and regulators have been more lax when it comes to the Internet industry, Chinese internet giant Tencent announced on Wednesday that its yearly profit was at its lowest level since 2019.

Tencent reported 115.2 billion yuan ($16.0 billion) in overall net profit for 2023 in an annual report filed with the Hong Kong Stock Exchange.

After Beijing imposed stricter monitoring measures in 2020, China’s tech industry, which had grown rapidly over the previous several decades and become one of the most active in the world, came to an abrupt stop.

Since then, authorities have loosened their regulations on the crucial domestic tech industry as worries about China’s economy as a whole have grown.

Tencent, one of the top gaming companies in the world and the creator of WeChat, the popular messaging and services app in China, revealed on Wednesday that its total income for 2023 will be 609.0 billion yuan ($84.6 billion), an increase of 10% from the previous year.

Additionally, the Shenzhen-based company said that it intends to expand the scope of its share repurchasing program, which it said will reach “over HKD100 billion” ($12.8 billion) in 2024—more than doubling from the previous year.

After authorities launched a new campaign to combat youth video game addiction in 2022, Tencent reported a 16 percent decline in its yearly earnings.

In addition, Li Chengdong, the head of Beijing-based digital consultant Dolphin, told AFP that despite more recent indications of vigor in the industry, the regulatory barrier for new games remains “relatively large”.

In China, new games cannot be released without official government clearance.

In 2021, the issuing of new game licenses was put on hold for nine months, and since then, the pace and consistency of approvals have not increased.

“Even if (Tencent) develops new games, there’s no guarantee it can distribute them,” Li stated.

These days, Tencent and a number of its local rivals, such as Alibaba, Huawei, and Baidu, are focusing on the exciting topic of artificial intelligence (AI).

Tencent debuted Hunyuan, an AI-powered chatbot, in September of last year with the goal of competing with ChatGPT, a US company whose services are unavailable in China.

A “top-tier foundation model with superior performance in numerical reasoning, logical inference, and multi-turn conversations” was Hunyuan’s description in the filing on Wednesday.

During a Wednesday earnings call, Martin Lau, the president of Tencent, stated that artificial intelligence “will serve as our growth multiplier going forward.”

But according to Li, gaming continues to be Tencent’s most significant industry, even with the company’s push into AI.

“In the short term, there’s not much expectation that the revenue from AI products could cover the costs.”

According to Beijing-based tech expert Kevin Zhou, Tencent is still hesitant to take significant steps in the AI space, in contrast to many other Chinese IT firms.

“(Tencent is) slower in pouring investment and could be up to one or two years behind the first movers,” Zhou stated.

The company is investing in up-and-coming studios, especially in Europe, in an effort to strengthen its position in the video game industry.

Established in 1998 amidst China’s swift economic growth, Tencent holds a significant position in the nation’s technology industry, serving as the progenitor of the WeChat “super-app”.

In China, WeChat is installed on the majority of mobile phones and is used for a variety of functions like social networking, digital payments, messaging, and calling.