Tencent Photo:VCG

Tencent reported a slowdown in its quarterly revenue growth on Wednesday, as the Chinese internet conglomerate continues to grapple with internet regulatory toughening that's intended to steer the platform economy toward improved legal compliance and more sustainable growth.

It is normal for domestic internet firms to report a moderation in revenue and earnings growth, analysts said, as the heated growth in the past is not sustainable.

Tencent's revenues grew 8 percent year-on-year to 144.2 billion yuan ($22.63 billion) in the fourth quarter, the company's financial disclosures revealed after Wednesday's market close. In the previous quarter, revenues rose 13 percent. 

The 8-percent reading was the internet giant's slowest quarterly revenue growth ever. For the whole of 2021, Tencent's revenues rose 16 percent to hit 560.1 billion yuan, also the slowest yearly revenue growth. 

Revenues from online advertising fell 13 percent to reach 21.5 billion yuan during the fourth quarter, an indication of "weakness in advertiser categories including education, games and internet services," he company said.

And, Tencent's non-International Financial Reporting Standards (IFRS) net profits dropped 25 percent from the year before to 24.88 billion yuan. 

This suggests the company posted a decline in non-IFRS net profits for a second consecutive quarter, after its non-IFRS net profits edged down 2 percent to $31.75 billion yuan in the third quarter, the first contraction in a decade.

 "The lackluster numbers mirror the internet sector trend, in which major internet platforms, like Alibaba and Tencent, align their strategic focus with a societal push for common prosperity," Liu Dingding, a veteran industry observer, told the Global Times on Wednesday.

In the words of Tencent, which described 2021 as a challenging year, the country's "internet industry is structurally shifting to a healthier mode characterized by a refocus on user value, technology innovation, and social responsibility," read a company filing with the Hong Kong stock exchange on Wednesday.




China's internet population has hit the ceiling, so it's not practical to expect the same rapid growth seen in the past, Liu noted.

There is a natural shift toward lower growth as a result of reduced demographic dividends, Zhang Yi, CEO of iiMedia Research Institute, told the Global Times on Wednesday.

Internet firms that have long bet on stellar growth enabled by their virtual prowess ought to increasingly refocus on the real economy.

Zhang cited internet healthcare, mobile offices and tourism as new growth levers for Tencent, but warned that it will take time.

Tencent, together with other internet giants, will ramp up their investments on making chipsets, according to Zhang.

As for the surge in interest in the metaverse among some domestic internet firms including Tencent, it's still more of a conceptual vision than something that will add revenues, he said.