Tech,  Wealth

Tencent on Fire: 2023 Report Shows Double-Digit Growth and Huge Share Buyback

On the 20th of March, Tencent unveiled its comprehensive financial performance report for the fiscal year of 2023, showcasing a revenue of 609.015 billion yuan, marking a 10% year-over-year surge, alongside a net profit (Non-IFRS) of 157.688 billion yuan, representing a noteworthy 36% year-over-year escalation. Notably, the revenue for the final quarter of 2023 amounted to 155.196 billion yuan, witnessing a 7% year-on-year increase; concurrently, the net profit (Non-IFRS) soared to 42.681 billion yuan, depicting a remarkable 44% year-on-year climb.

The substantial enhancement in AI-driven advertising targeting capabilities, the upsurge in advertising revenue, the expansion of gaming revenue within the international market, and the consistent augmentation of the digital economy collectively underpinned this significant upswing in performance.

Of particular interest to the market is Tencent’s declaration of a forthcoming surge in share repurchase. In 2024, the repurchase scale is set to at least double, catapulting from 49 billion Hong Kong dollars in 2023 to surpassing 100 billion Hong Kong dollars.

Annual net profit stood at an impressive 157.7 billion yuan.

The disclosed 2023 annual report by Tencent unveils a cumulative revenue of 609.015 billion yuan, accompanied by a net profit (Non-IFRS) of 157.688 billion yuan. Within the final quarter of 2023, revenue hit 155.196 billion yuan, marking a 7% year-on-year growth, while the net profit (Non-IFRS) soared to 42.681 billion yuan, showcasing a remarkable 44% year-on-year escalation.

Data underscores Tencent’s all-encompassing recovery in 2023, with gross profit, operating profit, and net profit consistently attaining substantial growth over four successive quarters. Notably, the fourth quarter witnessed growth rates of 25%, 35%, and 44% respectively, significantly surpassing revenue growth.

Among these achievements, nascent endeavors such as video accounts, mini-games, and WeChat search displayed outstanding performance, bolstering payment, advertising, and enterprise services. The year 2023 witnessed a twofold increase in video account user engagement time, alongside a more than 50% surge in annual revenue from small games. Tencent Hunyuan has evolved into a pioneering foundational model, excelling in mathematical derivation, logical reasoning, and multi-round dialogues, while also introducing AI assistant services in Tencent Conferences and Tencent Documents.

Capitalizing on the substantial enhancement in AI-driven advertising targeting capabilities, Tencent’s advertising revenue soared to 29.794 billion yuan in the fourth quarter, marking another quarterly peak. Additionally, the digital economy steadily expanded to 54.379 billion yuan, ranking foremost in revenue contribution, while overseas game revenues for the quarter reached 13.9 billion yuan, with an annual tally of 53.2 billion yuan, accounting for 30% of total gaming revenue.

Noteworthy is Tencent’s sustained dominance in To B revenue, which has exceeded 30% for three consecutive years, emerging as the cornerstone of the company’s business progression. The financial report underscores the robust performance of the financial technology and enterprise services sector, representing To B, with fourth-quarter revenues reaching 54.379 billion yuan, marking a 15% year-on-year upsurge, and full-year revenues totaling 203.763 billion yuan, constituting 33% of the total. Thus far, Tencent’s digital economy business has consistently contributed over 30% of its revenue for three successive years, persistently delivering stable revenue and fostering high-caliber business growth.

Throughout the past year, Tencent Cloud has diligently pursued a strategy of sustainable growth, fortifying its technological infrastructure and introducing several cutting-edge proprietary products. Tencent Cloud has secured the leading position in China’s market across distributed databases, audio-visual services, game cloud services, and industrial cloud solutions.

Furthermore, data reveals that Tencent, originating from social networking roots, amassed a combined monthly active user base of 1.343 billion for WeChat and WeCom by December 31, 2023, reflecting a 2% year-on-year increase. Conversely, QQ’s mobile terminal monthly active users totaled 554 million, marking a 3% year-on-year decline.

In addition, the financial report discloses Tencent’s headcount, which stood at 105,417 employees as of December 31, 2023, down from 108,536 employees during the same period in 2022. Tencent asserts that its hiring practices remain flexible, with employee compensation aligned with industry standards, performance-based incentives, bonuses, and equity options. The total remuneration cost for 2023 amounted to 107.675 billion yuan, compared to 111.182 billion yuan in 2022.

Unprecedented Buyback Endeavors

Tencent’s buyback initiatives surged to prominence in the past year, leading the pack among Hong Kong stocks, with plans for an even more ambitious 100 billion buyback scheme this year.

Financial data indicates that Tencent repurchased 152 million shares in the preceding year, amounting to approximately HK$49 billion. These repurchased shares have since been annulled.

Statistics further reveal the escalating magnitude of Tencent’s buybacks, with figures for 2021, 2022, and 2023 reaching HK$2.6 billion, HK$33.8 billion, and HK$49 billion, respectively.

Tencent has announced its intent to at least double the scale of share repurchases this year, escalating from HK$49 billion in 2023 to exceeding HK$100 billion in 2024. Emphasizing its commitment to enhancing shareholder value in the long run.

Additionally, Tencent’s 2023 full-year financial report recommends a dividend of HK$3.4 per share (approximately HK$32 billion) for the fiscal year ending December 31, 2023, marking a substantial 42% year-on-year increase.

R&D Investment Surpasses 64 Billion Yuan

Tencent’s fourth-quarter and full-year performance report for 2023 revealed an annual R&D investment exceeding 64.078 billion yuan. Since 2018, Tencent has allocated more than 269.654 billion yuan towards research and development endeavors. On a global scale, Tencent has filed applications for over 75,000 patents, with more than 37,000 patents granted.

Tencent underscores that the business growth fueled by technology innovation is evident in its latest financial report. Since its launch in September of the preceding year, Tencent Hunyuan has evolved into a preeminent foundational model. The capabilities of Tencent’s Hunyuan continue to expand, encompassing Vincent pictures, Vincent videos, and beyond. Having undergone testing in over 400 internal departments, AI assistant services have been integrated into Tencent meetings and Tencent documents.

Furthermore, the advertising business capitalizes on AI technology to significantly enhance advertising targeting capabilities. The fourth quarter of 2023 witnessed a 21% year-on-year surge in revenue to 29.794 billion yuan, marking a quarterly zenith.

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