On the afternoon of March 23, Tencent Holdings released its fourth quarter and full-year financial report for 2021.

According to the financial report, for the full year of 2021, Tencent’s revenue reached 560.12 billion yuan, a year-on-year increase of 16%, and the company’s annual profit was 227.810 billion yuan, a year-on-year increase of 42%; Non-International Financial Reporting Standards (Non-IFRS) Below, the profit attributable to the company's equity holders was 123.788 billion yuan, a slight increase of 1 year-on-year, which was the lowest net profit growth in the past ten years. In the fourth quarter, Tencent's net profit (Non-IFRS) was 24.88 billion yuan, a year-on-year decrease of 25%. Net profit has declined for two consecutive quarters.

Among them, gaming and social network business still account for a large proportion of revenue. As of December 31, 2021, Tencent’s social network revenue in 2021 was 117.3 billion yuan, a year-on-year increase of 8.

Tencent’s value-added services business annual revenue was 291.6 billion yuan, a year-on-year increase of 10. Among them, the local market’s full-year game revenue was 128.8 billion yuan, a year-on-year increase of 6. The annual game revenue in the international market was 45.5 billion yuan, a year-on-year increase of 31%.

In the fourth quarter, Tencent’s revenue was 144.2 billion yuan, which was expected by the market to be 145.3 billion yuan, a year-on-year increase of 8%; net profit was 94.96 billion yuan, a year-on-year increase of 60%. Among them, online advertising revenue is 21.5 billion yuan, with an estimate of 23.46 billion yuan; value-added service revenue is 71.9 billion yuan, with an estimate of 72.73 billion yuan; personal computer client game revenue is 10.6 billion yuan, with an estimate of 10.4 billion yuan. Financial technology and enterprise service revenue was 47.958 billion yuan, a year-on-year increase of 25%.

In terms of anti-addiction for minors, in the fourth quarter of 2021, the total duration of Tencent’s games for minors decreased by 88% year-on-year, accounting for 0.9 of the total duration of games in the local market. The total turnover of minors decreased by 73% year-on-year, accounting for 1.5% of the total turnover of games in the local market.

In terms of the number of users, as of December 31, 2021, the combined number of monthly active accounts of WeChat and WeChat was 1.268 billion, a year-on-year increase of 3.5. The number of monthly active QQ mobile accounts was 552 million, a year-on-year decrease of 7.2%. The number of paid members of Tencent Video increased by 1 to 124 million year-on-year, and the number of paid members of music increased by 36 to 76 million year-on-year.

The financial report also disclosed that as of December 31, 2021, Tencent had 112,771 employees, a year-on-year increase of 31.3. The total remuneration in 2021 was 95.523 billion yuan, a year-on-year increase of 37.1. Based on this calculation, the average monthly salary of Tencent employees reaches 70,500.

At the performance conference after the financial report, Tencent Chairman and CEO Ma Huateng said: "2021 is a year full of challenges. We actively embrace changes and implement measures to strengthen the company's long-term sustainable development. , but the impact on revenue growth has slowed down. Despite the impact on our finances, we have continued to make strategic progress in our business, including popularizing the use of our enterprise software and productivity office tools, increasing the content creation and viewing volume of our video accounts, and expanding into international markets. Game business. We believe that China’s Internet industry is structurally moving towards a healthier model, returning to its roots centered on user value, technological innovation and social responsibility. We are actively adapting to the new environment, reducing costs and increasing efficiency, and focusing on key strategies. field, striving for long-term sustainable growth. ”

Local game revenue growth is slower than overseas

Tencent’s game revenue includes local and international parts. In 2021, these two revenue are respectively. 128.8 billion yuan and 45.5 billion yuan. The year-on-year growth rates were 6 and 31 respectively, and the overall game business growth rate was approximately 12. In the fourth quarter, Tencent’s local game revenue growth was only 1, while overseas game revenue growth reached 34.

Overseas game growth momentum is stronger, while domestic growth is relatively weak.

According to the financial report, the growth of local game revenue was mainly driven by the revenue growth of "Honor of Kings", "Call of Duty Mobile" and "Tianya Mingyue Dao", but was partially offset by the decrease in revenue of "DnF" and "Peace Elite" . The growth of overseas games was driven by games such as “PUBG Mobile”, “Valorant”, “Brawl Stars” and “Clash of Clans”.

In terms of game restrictions for minors, the financial report stated that in the fourth quarter of 2021, the total game time for minors decreased by 88% year-on-year, accounting for 0.9 of the total time of local games. 1.5 of the total turnover.

Tencent President Liu Chiping said in the earnings call that the impact of minor protection on revenue growth will be digested in 2022, and corresponding new revenue will be obtained after the new game version is released.

Since July last year, the approval list of domestic online games has not been updated, which also has obvious restrictions on the launch of Tencent’s new games.

Liu Chiping also said that because the new version number has not yet been announced, domestic game business revenue is not very predictable. However, Tencent will accelerate the pace of international game investment and release, increase the penetration of existing IP, and continue to release new games.

It is worth noting that the high growth rate of international games is one of the highlights of Tencent’s financial report. According to App Annie’s “China Game Manufacturers Overseas Revenue Ranking” last December, Tencent ranked third on the list.

Tencent Games has made frequent overseas investments, including Klei Entertainment, the developer of "Don't Starve" and "Anoxia", Sumo Group, the parent company of the developer of "Sackboy Adventures", and developers of "Blood Revenge", " Slamfire, the parent company of Turtle Rock Studios, the studio of well-known games such as "Long 4 Dead", etc.

In addition, Tencent also established the overseas game brand Level Infinite at the end of last year, and announced "Honor of Kings International Edition", "Don't Starve: New Home" mobile games, "Edge of Rebirth", "GTFO" and many other games. Level Infinite will publish game works produced by Tencent Games' studios and other third-party studios, and provide technical and R&D support to overseas partner studios.

Digital economy revenue has become a new growth engine

Due to tighter supervision and the weakness of the macroeconomy and some advertiser industries, Tencent’s advertising business revenue in 2021 will drop to a year-on-year growth rate of The number of digits is 7.8, while the growth rate in 2020 is 20.

Among them, social media and other advertising revenue increased by 1.1 to 75.3 billion yuan year-on-year, while media advertising revenue fell by 7 to 3.3 billion yuan. According to the financial report, the former is driven by the growth of WeChat Moments mini-program advertisers, while the latter is affected by the macro environment and delays in content release.

Online education is Tencent’s major advertising customer, and the double reduction policy has a significant impact on this part of the revenue. Tencent Chief Strategy Officer James Mitchell said in the conference call: "In the past few quarters, Tencent's advertising business has been more affected than the entire industry. The main reason is related to the composition of our advertisers, especially online education. Industry, it accounted for 10-15 of Tencent's advertising revenue a year ago, but now it is only 1-3 in the fourth quarter of last year, which also explains the year-on-year decline in advertising revenue in the fourth quarter. "But he expected that as the Adapting to the new regulatory environment, the advertising business will resume growth in the second half of 2022.

For the first time, Tencent’s financial technology and enterprise services have become Tencent’s main sources of income.

In the fourth quarter of 2021, Tencent's financial technology and enterprise services segment's revenue increased by 25% year-on-year, reaching 47.958 billion yuan. The digital economy (To B) revenue surpassed the online game segment for the first time and became Tencent's business segment with the largest revenue contribution. This means that digital economy revenue, mainly serving the B-side, has become Tencent’s new growth engine.

The growth in financial technology services revenue mainly reflected the increase in commercial payment amounts. The rapid year-on-year growth in enterprise service revenue is due to the digitization of traditional industries and the video trend of the Internet industry, as well as the contribution of enterprise service revenue since the merger of Bitauto in November 2020.

Ma Huateng has previously stated that since 2015, Tencent has begun to integrate the Internet and industry. In 2018, after the company carried out the "930" structural adjustment, it officially embraced the industrial Internet. In this process, Tencent is positioned as a digital assistant, providing digital services to all walks of life.

In the first quarter of 2019, Tencent Holdings separately disclosed revenue data for the financial technology and enterprise services segment for the first time. In the quarter, the revenue of this segment was 21.789 billion yuan, accounting for 25.5% of the overall revenue, and the online game segment accounted for 33.4%. In recent years, Tencent has stepped up its embrace of the industrial Internet and formed industrial digital solutions in many fields such as government affairs, finance, education, transportation, medical care, smart retail, industry, and energy.

The financial report shows that in 2021, Tencent’s financial technology and enterprise services segment’s revenue costs were 120.8 billion yuan, a year-on-year increase of 32%. This segment is also the business segment with the fastest growth rate of Tencent’s cost investment. At this stage, Tencent is actively participating in the construction of "digital data in the east and computing in the west" and has invested in the construction of large data centers in Guiyang, Chongqing, Guangdong, Jiangsu and other places.

In the past year, Tencent Cloud has launched services in international data centers in Indonesia, Thailand, Germany, Japan, Hong Kong, China and other places. The overall global operation availability zone has reached 70, covering 27 geographical areas. It operates more than 1 million servers and provides technical support for the digital transformation of domestic and foreign enterprises.

R&D investment doubled in three years

In 2021, Tencent’s R&D investment reached a new high, with a year-on-year increase of 33%, reaching 51.8 billion yuan. In 2018, the company's R&D investment was only 22.936 billion yuan. This means that Tencent’s R&D investment has doubled in three years.

In 2021, Tencent continued to focus on independent research and development of core technologies and achieved many breakthroughs in the fields of chips, operating systems, databases, servers and other technologies.

In terms of chips, for the three major scenarios of AI computing, video processing, and high-performance networks, Tencent has independently developed the AI ??inference chip Zixiao, the video codec chip Canghai, and the smart network card chip Xuanling. The product performance is industry-leading. .

At the same time, Tencent has in-depth cooperation with a number of chip companies to develop its own Xinghai server. Combined with the rich scenarios of cloud computing, the overall machine performance is the strongest in the industry and the reliability is doubled. In the past year, Xingxinghai has rapidly iterated, supporting all platforms and multiple scenarios, and its scale has increased by up to 400 times, becoming the fastest growing server product in the industry since its launch.

In 2021, Tencent also released the sixth-generation 100G cloud server, which adopts a comprehensive self-developed technical architecture, with a maximum improvement of 220 in computing performance and a maximum improvement of 300 in network forwarding performance. It has been used in e-commerce, social networking, games, etc. Large-scale application in business scenarios.

On top of software and hardware infrastructure, Tencent has built ubiquitous cloud services through public clouds, private clouds and customer local clusters. In November last year, Tencent Cloud officially released the industry's first distributed cloud operating system with global governance, Aero. Aochi single cluster supports 100,000 servers and millions of containers, and manages more than 100 million CPU cores.

In the database field, Tencent Cloud Database TDSQL released a new Oracle-compatible engine to meet the rapid launch requirements of financial core; and TDSQL financial-grade fully self-developed new sensitive engine, which can achieve unlimited expansion, online changes, and adaptation Financially sensitive business.

Currently, Tencent Cloud Database TDSQL has successfully served more than 500,000 customers, covering finance, government, e-commerce, and games. It has helped financial institutions localize their core systems and served nearly half of the top 20 domestic banks.

In the audio and video field, Tencent Cloud Audio and Video covers 90 domestic audio and video customers and has 100 new generation international codec patents. In 2021, TRTC's backend architecture technology won the "China Patent Gold Award". The ultra-low-latency live broadcast product "Quick Live" reduced the live broadcast delay by more than 90%, and the comprehensive quality of service (QoS) far exceeded standard live broadcasts.

According to the latest 2021 R&D big data report released by Tencent Holdings, the number of Tencent’s R&D personnel will increase by 41% year-on-year in 2021. There were more than 6,000 new R&D projects, an increase of 51% year-on-year in 2020. In the past three years, Tencent Holdings has invested more than 120 billion yuan in research and development.

The number of employees will still increase in 2022

Earlier, it was reported that Tencent’s external recruitment plan is tightening, and some business groups have begun “optimization”.

In April 2021, Tencent established an "Online Video BU" based on Tencent Video, Weishi and Yongyongbao. Through the integration of content production, distribution and application channels, Tencent reduced resource consumption while continuing to deepen its development. Video track.

In February 2022, the main part of Tencent Pictures will be adjusted from the Platform and Content Group (PCG) to the Corporate Development Group (CDG). The original IP film and television development with strong commercial attributes The work is handed over to Xinli Media, China Literature Film and Television, a subsidiary of China Literature Group, and Tencent Animation, a subsidiary of PCG. This is also a kind of resource integration for the latter, fully tapping the value of China Literature Group’s IP.

These business adjustments do not necessarily mean an overall reduction in personnel, but growth will be relatively limited. The financial report shows that as of December 31, 2021, Tencent had 112,700 employees, a year-on-year increase of 31.3.

"This year's employee growth will drop significantly, and the growth rate will be much lower than the previous two years." Liu Chiping said that Tencent's staff reduction plan is related to organizational adjustments. "In terms of organizational optimization (which does not mean investment reduction), core businesses with advantages will continue to increase investment, while marginal and loss-making businesses that can be reduced will reduce recruitment." He said that Tencent still continues to introduce core technology talents and outstanding talents. of fresh graduates, it is expected that the number of personnel will still grow in 2022.

Since the beginning of this year, many Internet companies and technology companies have promoted stock repurchases. Yesterday, Alibaba announced an increase in the scale of repurchases to US$25 billion, which is the largest repurchase plan in its history. Tencent conducted a wave of intensive repurchases in January this year, repurchasing a total of 11 times from January 5 to January 20, totaling 4.8314 million shares.

Reducing its holdings in JD.com is another aspect of Tencent’s “active” strategy. At the end of last year, Tencent issued nearly 460 million Class A ordinary shares of JD.com to qualified shareholders in the form of interim dividends. The equity held by Tencent in JD.com will be reduced from 16.9 to 2.2. Liu Chiping also resigned as a director of JD.com.

James Mitchell said that Tencent has invested tens of billions in different directions in the past few years, and "divestment is not a big deal." He said that Tencent Investment would prefer to choose privatized companies that have not been listed and help them expand and go public.

The financial report shows that as of December 31, 2021, the fair value of Tencent’s equity in listed investment companies (excluding subsidiaries) was 982.8 billion yuan, close to one trillion yuan.

In this regard, Liu Chiping said that 2020 and 2021 are both turning years for Tencent, and competition in the industry is also very fierce. Tencent has adopted "radical marketing measures to deal with competition." However, with the Internet Tencent will conduct comprehensive cost optimization due to fundamental changes such as paradigm shifts in the industry. He predicts that profit margins will improve in 2023.

As of the close of trading on March 23, Tencent’s share price rose slightly to HK$389, and the Hong Kong stock market value was 3,739.1 billion yuan. In terms of U.S. stocks, Tencent’s stock price opened at a low of $46.88 and rose to $47.70 as of press time.