Beijing: Tencent Holdings, which manages the biggest social media app in China and the world's biggest gaming company by revenue, has made a noticeable comeback in 2022 as it downsizes its workforce, braces for poor performance. closed companies and sold some investments in response. slow sales.
However, analysts claim that as the lean, mean-spirited internet giant enters 2023 and China's macroeconomic environment stabilizes and regulatory changes take hold, the company should recover.
"Tencent may finally stabilize in the fourth quarter, but a tangible recovery in revenue growth will have to wait until 2023," said Sean Yang, managing director and deputy head of research at Blue Lotus Capital Group, a Shenzhen-based boutique investment bank.
Also Read: Specifications of the OnePlus 11 have leaked
"Improving macro economy should provide a boost to its advertising and gaming businesses."
Tencent's downsizing in 2022 has been driven by a dynamic of increasing efficiency. In an internal meeting in December, founder Pony Ma chastised managers for a lack of urgency and warned that the cost-cutting measures would continue into 2023.
Ma argued that the company should focus on its core competencies rather than scale and peripheral area expansion.
Over the past year, there have been rounds of layoffs, especially in industries that are losing money, such as cloud computing and video streaming. As the number of employees peaked in the first quarter, the tech giant has cut 7,377 jobs in the second and third quarters.
Also Read: Lenovo releases its Tab M9 designed for children
In addition to Penguin Esports, a Twitch-like platform that Tencent launched six years ago, Cui Bao, a news aggregator app in July, and Wu Vlog, a short-form video app in September, also shut down services. According to reports in Chinese media, at least 40 products were to be discontinued by the WeChat operator in 2022.
Tencent's investment empire, which once covered "half the rivers and mountains" of China's Internet landscape, has shrunk as a result of the company selling its stakes in companies such as Si and Meituan, in response to Beijing's restrictions on "irrational" . expansion of capital" and the need to generate some profit.
Tencent, a company it has backed since 2015, announced in November that it was giving more than 90% of its stake in Meituan, a company to current shareholders, in the form of a special dividend. Tencent's shareholding will drop to 2 percent from its current 17 percent after the distribution ends in March 2023.
Despite the fact that the pace of regulatory change appears to have slowed, Ma cautioned that the company's gaming division may still face tighter regulations.
As of September, when Health Games, one of Tencent's subsidiaries, received the approval, the company had not acquired any new video game licenses in the previous 15 months.
Only recently have popular games been licensed, including tactical shooter Valorant from US developer Riot Games and multiplayer online battle arena game Pokémon Unite from its own TiMi Studios.
Due to regulatory uncertainty and a weak economy, the company's domestic game revenue fell 7% to 31.2 billion yuan (US$4.52 billion) in the third quarter. As a result, it is looking for growth overseas through partnerships and investments.
Valorant was one of the games that helped the company's overseas gaming revenue, which rose 4% to 11.7 billion yuan in the third quarter, experience "robust growth".
Tencent has had a tough year, with half its market value wiped off in the last 12 months. In October, its shares hit a six-year low before making some corrections. According to many analysts, its worst days may be behind the Shenzhen-based giant.
According to a report published in December by Zhongtai International analyst Qin Yue, the worst is over. According to the statement, "the company's earnings will resume rapid growth in 2023, as the economy recovers in the post-pandemic era," although the pandemic remains a short-term disturbance.
Also Read: New Year's Hub is launched by Spotify to welcome 2023
techreadout of a closed-door economic meeting, China's "platform enterprises", which include large Internet companies such as Alibaba Group Holding and Tencent, will "pivot their capabilities" to drive economic growth, create jobs and promote international will be encouraged to demonstrate fully". Competition.
“We expect an improved regulatory environment in 2023 and do not expect the government to introduce major new regulations in 2023,” said Evan Su, an analyst at Morningstar.
Su expects Tencent's total revenue to increase by 15% in 2023 thanks to a return to the domestic gaming industry. According to Su, home gaming sales could resume year-over-year growth in the second quarter of next year.