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China Big Tech in 2023: Tencent expected to bounce back as economy stabilises after downsizing, job-cutting and refocusing

  • Improving efficiency has been the dynamic driving Tencent’s downsizing in 2022, with multiple rounds of lay-offs
  • Many analysts say the worst is over for the internet giant and revenue should improve as China’s economy stabilises

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Analysts say the worst may be over for Tencent. Photo: Bloomberg
Iris Dengin Shenzhen

2022 saw a noticeable retreat by Tencent Holdings, which runs China’s biggest social media app and the world’s largest gaming business by revenue, as it downsized its workforce, shut down non-performing businesses and exited some investments in the face of slowing sales.

But as the leaner, meaner internet giant heads into 2023, analysts say the company should rebound as China’s macroeconomic environment stabilises and regulatory change beds down.

“Tencent may finally stabilise in the fourth quarter, but a solid recovery in revenue growth will need to wait until 2023 when an improvement in the macro economy should boost its advertising and gaming businesses,” said Shawn Yang, the Shenzhen-based deputy research head and managing director at Blue Lotus Capital Group, a boutique investment bank.

Improving efficiency has been the dynamic driving Tencent’s downsizing in 2022. Founder Pony Ma warned that cost-cutting measures will continue in 2023, as he berated managers for a lack of urgency in an internal meeting in December. Ma said the company must focus on core businesses, instead of seeking expansion in peripheral areas and scale.
Multiple rounds of lay-offs have been conducted in the past year, especially in loss-making businesses such as cloud computing and video streaming. In the second and third quarters, the tech giant cut 7,377 jobs since staff numbers peaked in the first quarter.

Tencent ended services at Penguin Esports, a Twitch-like platform it launched six years ago, the news aggregator app Kuai Bao in July, and short video app Vue Vlog in September among others. The WeChat operator closed down at least 40 products in 2022, according to Chinese media reports.
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