China's Tencent Holdings posted a weaker-than-expected 7% rise in fourth-quarter revenue on Wednesday as its gaming revenue shrank, and said it was expecting to at least double its share buybacks this year.
The world's largest video game company and operator of the WeChat messaging platform reported revenue of 155.19 billion yuan ($21.56 billion) for the three months ended December 31. That compared with the 157.2 billion yuan average of 23 analyst estimates compiled by London Stock Exchange Group (LSEG).
Tencent's core gaming business suffered a notable slowdown in the fourth quarter. Gaming revenue in China declined by 3% to 27 billion yuan, while international gaming revenue increased only 1% to 13.9 billion yuan, or declined by 1% when excluding currency fluctuations.
The company also said intends to at least double the size of its share repurchases from HK$49 billion in 2023 to over HK$100 billion ($12.78 billion) in 2024. Its shares had fallen some 16% over the past year to Tuesday's close.
In a call with media, Tencent president Martin Lau said the company saw a slowdown in gaming revenue last quarter partly because many zealous gamers had already spent on their games in the first quarter last year when China moved to lift all COVID-19 restrictions.
As a result, Lau said the company's gaming revenue in the first quarter this year will also be soft as compared with last year.
However, he said that Tencent has a pipeline of new games to boost its domestic revenue. Most notably, Lau said the company plans to release its "Dungeon & Fighter Mobile" in the second quarter which JP Morgan analysts estimate can bring in 3 to 4 billion yuan of revenue.
For all of last year, Tencent’s revenue rose 10% to 609 billion yuan, trailing expectations of 612.2 billion yuan.
Still, this marks a year of recovery for Tencent, which reported its first annual revenue decline in 2022 as it was hit by Beijing’s sweeping crackdown on the tech sector. By comparison, it saw revenue growth in every quarter last year.
Revenue from online ads rose 21% to 29.8 billion yuan as the Shenzhen-based giant continues to expand its ad distribution capability.
Revenue from fintech and business services grew 15% to 54.5 billion yuan as the firm continued its expansion in those areas.
During the call, Lau also highlighted AI as a focus for Tencent. Tencent said its AI model "Hunyuan" has been scaled up to reach a trillion-parameter scale. The number of parameters is often used by the tech industry to measure the strength of a given AI model.
Lau added that a key focus for its model this year will be on improving the text-to-image and text-to-video capability.
Net income for the quarter declined 74% compared with the same period last year, but the decline was attributed to Tencent's sale of its stake in food delivery giant Meituan.
Excluding the impact of investment-related transactions, Tencent said its quarterly profit grew 44% year-on-year to 42.68 billion yuan.
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