Tencent's Results Disappoint Amid Slowing Chinese Economy, But Outlook Is Brighter — Update

By Tracy Qu and Farah Elias

Tencent Holdings reported worse-than-expected results in the fourth quarter as the Chinese technology giant navigated a slowing economy.

The videogame and social-media company said Wednesday that its fourth-quarter net profit slumped 75% to 27.025 billion yuan ($3.75 billion), attributing the decline to a CNY106.6 billion gain from the disposal of its stake in Chinese food-delivery giant Meituan a year earlier.

The Shenzhen-based company said revenue for the period rose 7.1% to CNY155.20 billion.

Both measures missed the expectations of analysts polled by FactSet.

The results come as Beijing strikes a positive tone on the country's tech industry. Chinese Premier Li Qiang in March called artificial intelligence an important engine for "new productive forces," according to state media.

Tencent said revenue from its bread-and-butter game and social-network business, which accounted for 45% of the top line, fell 2% to CNY69.08 billion for the fourth quarter. Domestic game sales declined 3% to CNY27.0 billion, while international game sales increased 1% to CNY13.9 billion.

At a briefing after the results, Tencent President Martin Lau acknowledged that revenue from the domestic game business has been soft in 2023, saying that monetization stagnated for its two major games, "Peacekeeper Elite" and "Honor of Kings."

But the company expects an improvement from the second quarter, he said. Blockbuster title "Dungeon & Fighter Mobile" will also be launched then.

The improved outlook is the latest sign that things are looking up for the videogame maker.

Beijing has softened its stance on the videogame sector in recent months, with gaming approvals appearing to be back on track.

Chinese regulators last month approved a new batch of imported titles, including the DnF Mobile game from Tencent and its Korean partner Nexon.

The moves are being seen as part of efforts to reverse a prolonged decline in the country's stock markets and support a slowing economy.

Tencent's shares have yet to fully recover to where they were in late December, when they plunged 12% in a single day--losing about $46 billion in market value--after China's videogame regulator proposed measures to limit the time and money people spend on computer and smartphone games.

Shares closed Wednesday at 288.80 Hong Kong dollars, compared with around HK$310 in late 2023.

The company said it will issue a final dividend of HK$3.40 a share for 2023, up from HK$2.40 in 2022.

It also intends to at least double the size of share buybacks to over HK$100 billion this year from HK$49 billion in 2023. Lau said the company's shares are undervalued and increasing buybacks is beneficial for shareholders.

Write to Tracy Qu at tracy.qu@wsj.com and Farah Elias at farah.elias@wsj.com

(END) Dow Jones Newswires

March 20, 2024 06:48 ET (10:48 GMT)

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