After Eking Out Small Revenue Growth, Billionaire Pony Ma Says Tencent Will Keep Cost-Cutting Measures

Tencent Holdings is back growing again, after two quarters of falling revenue, but cofounder and billionaire Pony Ma still wants the company to pursue cost-cutting measures and improve efficiencies.

The 51-year-old Ma, who is currently the country’s third richest man, saw his wealth shoot up by $3.7 billion to $39.3 billion on Thursday, after the WeChat operator on Wednesday reported a slim 0.5% revenue gain to $20.8 billion for the last three months of 2022. Shares of the Hong Kong-listed firm surged 8.2% as investors are hopeful about the outlook for advertising and international games expansion as future growth drivers.

Bu Ma appears to be only cautiously optimistic about growth. In the mogul’s once-in-a-year address with media discussing Tencent’s performance, he said the tech behemoth would keep following the direction of improving efficiency and cutting costs. “The goal is to get rid of the fat, and build up the muscle,” he says. “We will invest our personnel and resources into new and really effective areas.”

The billionaire didn’t say which business he is looking to shrink. He emphasized that he would assess units based on criteria including gross margin and long-term planning. Last year, the usually soft-spoken Ma is said to have issued a strongly-worded criticism of company staff, saying that “you can’t even survive as a business, yet you’re chilling on the weekends, playing ball,” according to a Bloomberg report.

Tencent, on its part, spent most of last year reeling from China’s crackdown on the internet sector. With a long freeze on the approving of gaming licenses – which has now been lifted — it was at one time unable to make money from new games. And as the economy slumped amid country-wide lockdowns for Covid-19, the company’s advertising unit took a heavy toll as well.

Tencent, as a result, cut its headcount for the first time in almost a decade. While Ma didn’t say whether the company would keep reducing workforce, its billionaire President Martin Lau said Tencent would seek to use existing resources to expand in promising areas such as video, international games and artificial intelligence. He called generative AI technologies behind the ChatGPT bot a “growth multiplier,” and pledged to gradually roll out similar capabilities in Tencent’s business units ranging from gaming to cloud computing.

“We will definitely not reverse back to the relatively unrestrained development path prior to the pandemic,” says Lau, who is retiring from the company’s board by rotation but remains its president. “We will improve efficiency in a discipline-oriented way.”

Some analysts expect that Tencent can make more by putting more ads in WeChat’s video feeds, and they highlight the company’s potential overseas gains. In the fourth quarter, revenue from international games went up by 5% to $2 billion, while that from domestic titles declined 6%. “Bright spot is seen for international games with revenue contribution increasing from 28% in 4Q21 to 33% in 4Q22,” Jefferies analysts led by Thomas Chong wrote in a research note. “In 2023, we expect a turnaround story for online games post minor protection adjustments last year and more resources on content upgrades and new games development.”