Tencent admits to ‘soft’ cloud growth compared to hyperscale peers

Says Beijing’s internet monopoly and lending laws are nothing to worry about, pledges IaaS bounce-back

Tencent has posted quarterly results that feature the usual assortment of very, very, large numbers heading in pleasing directions, but also admitted that its cloud operation was not able to match the surge reported by other hyperscalers around the world.

Revenue for Q3 came in at $18.4bn, an increase of 29 percent year-on-year. Operating profit of $5.6bn was up 34 percent year-on-year.

The company said it had 1.21 billion monthly active users across its Weixin, WeChat and QQ social networks, 120 million subscribers to its streaming video services and 52 million people tuned in to its paid music streaming services. Games like PUBG and Call of Duty continued to attract tens of millions of users worldwide.

But the company’s cloud had an off quarter, with year-on-year growth rates falling by an unspecified amount.

Alibaba Cloud

Alibaba Cloud on the cusp of turning a profit after growing 60 percent in a year


“During the quarter, cloud and other business services revenue were affected by the lingering impact from pandemic, causing delays in project deployment and new contract sign-ups, as well as by non-recurring adjustments to certain IaaS contracts,” investors were told. “The year-on-year revenue growth rate was therefore lower than previous quarters, which we expect to be temporary in nature.”

Company president Martin Lau admitted that Tencent’s cloud business experienced a “softer quarter, especially compared to peers” but also said “this is going to go away in the next quarter.”

He described Q3 as “more of a one-time non-recurring event on the delay of certain projects and the restructuring of certain contracts.”

Tencent’s status as a challenger to market leader Alibaba Cloud also makes life hard.

“I would say we are playing catch-up and we actually rely more on new projects,” Lau said. “During the pandemic, some of these new projects get delayed and, as a result, the catch-up process was kind of disrupted.”

Lau added that the biggest cloud opportunity in recent months has been in providing infrastructure to power games and deliver short videos. In the former market he said Tencent Cloud has grown to meet the needs of the group’s own games but doesn’t recognise that work as revenue. In the short video market, he mentioned “a competitive reason” for not doing well. China’s big telcos, Huawei and players like Baidu are all trying to grow cloud businesses, so while Lau would not elaborate on the rival that hurt Tencent, suffice to say competition is fierce.

During the pandemic new projects get delayed and, as a result, the catch-up process was kind of disrupted

Tencent’s SaaS and PaaS business continued to do well, with the latter’s packaged security services exciting financial, healthcare and Internet services clients.

The WeCom collaboration suite, which comprises an enterprise version of Weixin, Tencent Docs and Tencent Meeting, grew 100 percent year-on-year. Tencent Meeting is a Zoom-like tool and has now gathered 100 million registered. A new enterprise version of the tool was launched earlier this week.

In response to questions from financial analysts Lau also addressed Tencent’s view of recent regulatory changes in China. Commenting on a proposed new antitrust law, Lau said Tencent welcomes the scrutiny because the company is at its best when competing for business, supports the intent of the law and will co-operate with authorities. On recently-introduced financial regulations designed to ensure lending doesn’t imperil China’s small business sector, Lau explained that Tencent is aware of the law and runs a very conservatively-managed loan book to ensure it does not appear to represent risks that the new law is designed to quell.

The lending laws are widely thought to be the main reason that Beijing derailed the float of Alibaba’s Ant Group financial services operation. ®

Broader topics

Other stories you might like

  • Always read the comments: Beijing requires oversight of all reader-generated chat
    'Editing and review' teams will be required to read everything and report dissent

    The Cyberspace Administration of China has announced a policy requiring all comments made to websites to be approved before publication.

    Outlined in a document published last Friday and titled "Provisions on the Administration of Internet Thread Commenting Services", the policy is aimed at making China's internet safer, and better represent citizens' interests. The Administration believes this can only happen if comments are reviewed so that only posts that promote socialist values and do not stir dissent make it online.

    To stop the nasties being published, the policy outlines requirements for publishers to hire "a review and editing team suitable for the scale of services".

    Continue reading
  • China is trolling rare-earth miners online and the Pentagon isn't happy
    Beijing-linked Dragonbridge flames biz building Texas plant for Uncle Sam

    The US Department of Defense said it's investigating Chinese disinformation campaigns against rare earth mining and processing companies — including one targeting Lynas Rare Earths, which has a $30 million contract with the Pentagon to build a plant in Texas.

    Earlier today, Mandiant published research that analyzed a Beijing-linked influence operation, dubbed Dragonbridge, that used thousands of fake accounts across dozens of social media platforms, including Facebook, TikTok and Twitter, to spread misinformation about rare earth companies seeking to expand production in the US to the detriment of China, which wants to maintain its global dominance in that industry. 

    "The Department of Defense is aware of the recent disinformation campaign, first reported by Mandiant, against Lynas Rare Earth Ltd., a rare earth element firm seeking to establish production capacity in the United States and partner nations, as well as other rare earth mining companies," according to a statement by Uncle Sam. "The department has engaged the relevant interagency stakeholders and partner nations to assist in reviewing the matter.

    Continue reading
  • Chinese startup hires chip godfather and TSMC vet to break into DRAM biz
    They're putting a crew together, and Beijing's tossed in $750m to get things started

    A Chinese state-backed startup has hired legendary Japanese chip exec Yukio Sakamoto as part of a strategy to launch a local DRAM industry.

    Chinese press last week reported that Sakamoto has joined an outfit named SwaySure, also known as Shenzhen Sheng Weixu Technology Company or Sheng Weixu for brevity.

    Sakamoto's last gig was as senior vice president of Chinese company Tsinghua Unigroup, where he was hired to build up a 100-employee team in Japan with the aim of making DRAM products in Chongqing, China. That effort reportedly faced challenges along the way – some related to US sanctions, others from recruitment.

    Continue reading
  • TikTok US traffic defaults to Oracle Cloud, Beijing can (allegedly) still have a look
    Alibaba hinted the gig was worth millions each year

    The US arm of Chinese social video app TikTok has revealed that it has changed the default location used to store users' creations to Oracle Cloud's stateside operations – a day after being accused of allowing its Chinese parent company to access American users' personal data.

    "Today, 100 percent of US user traffic is being routed to Oracle Cloud Infrastructure," the company stated in a post dated June 18.

    "For more than a year, we've been working with Oracle on several measures as part of our commercial relationship to better safeguard our app, systems, and the security of US user data," the post continues. "We still use our US and Singapore datacenters for backup, but as we continue our work we expect to delete US users' private data from our own datacenters and fully pivot to Oracle cloud servers located in the US."

    Continue reading

Biting the hand that feeds IT © 1998–2022