Tencent Holdings Ltd., the Chinese gaming and social media giant, reported a 1% increase in revenue for the final quarter of 2022 after two consecutive quarters of contraction.
The increase in revenue was driven by a 15% rise in online advertising revenue, with its TikTok-style video feature attracting marketers. Tencent executives cited an improving economy for increased spending and hoped Beijing would ease regulatory restrictions.
Tencent President Martin Lau stated that the company plans to integrate artificial intelligence capabilities across its products, from WeChat to online media.
Although Tencent’s revenue has rebounded slightly, the growth rate is still far from its double-digit gains of previous years. Since then, regulators have clamped down on undesirable online content and froze gaming approvals to combat addiction.
Despite this, the company’s international gaming and AI prospects look promising. Tencent is also divesting assets while increasing its appetite for foreign gaming assets, such as Valorant and Lost Ark. Both titles are slated to refill its long-empty pipeline in 2023 after securing game approvals in December 2022.
The company plans a Valorant esports league to generate sponsorships for the Riot Games Inc. shooter.
However, the regulatory landscape in China remains unpredictable, and many industry executives and investors caution against buying wholesale into the Chinese government’s rhetoric.
They worry that Beijing may tighten the reins again once the economy stabilizes. Rising tensions between the US and China could also hurt Tencent’s international gaming foray. That is evidenced by the push to ban or sell ByteDance Ltd.’s TikTok in the US.
Tencent’s domestic gaming sales barely grew over the past year. However, global hits like Valorant and Lost Ark and integrating AI capabilities across its products could enhance the company’s core social and gaming businesses.
Despite the challenges posed by China’s regulatory landscape and the pandemic, Tencent’s prospects for growth in 2023 look promising, fueled by a post-Covid rebound in consumer spending and advertising.