Tencent Joins Alibaba in Spending Spree as Competition Grows
- Tech giant pledges to invest a portion of incremental profits
- Compliance with fintech rules will be “relatively manageable”
Tencent Holdings Ltd. pledged to sharply increase investments this year after posting a 25% gain in quarterly revenue, joining its biggest rivals in a spending binge that will jack up competition in China’s post-pandemic internet arena.
China’s largest tech corporations are vying to entice users in the fast-growing arenas of online commerce and video. Tencent plans to plow a larger portion of its incremental profits this year into cloud services, games and video content, joining Alibaba Group Holding Ltd. and Meituan in telegraphing sharp hikes in investment. Tencent is trying to sustain growth in revenue, which climbed to 135.3 billion yuan ($21 billion) in the three months ended March. But its shares slid more than 3% in Hong Kong on concerns about margin erosion, which prompted brokerage CICC to trim its earnings estimate.
The increased spending comes as Tencent faces competition from the likes of ByteDance Ltd. and growing scrutiny from Beijing. Pony Ma’s company has largely escaped the antitrust crackdown for now -- despite its ubiquitous WeChat app offering unrivaled insights into all aspects of Chinese life and a commanding lead in gaming, music and social media markets. But its fintech arm, alongside those of other giants such as Didi and Meituan, faces wide-ranging restrictions similar to the ones imposed upon Jack Ma’s Ant Group Co.