What Is Tencent?

You've probably heard a lot about Alibaba Group (BABA) and Baidu (BIDU). These are two of China's most well-known technology companies. While Alibaba is known for its focus on retail and e-commerce, Baidu offers services like artificial intelligence (AI) and specialty services, such as mapping and data storage. But there is another tech company that isn't always front and center on investors' minds—Tencent Holdings.

Tencent is one of China's largest technology companies. It was founded in 1998 and is based in Shenzhen, China. The company has locations across Asia, including Tokyo and Seoul, as well as offices in Amsterdam and Palo Alto, California. The company's mission is to promote sustainability and innovation while helping shape the digital future of industries within the economy.

The company functions in a series of technology-related spheres, including video gaming, social media, entertainment, streaming and cloud services, and advertising. Some of its most popular offerings include instant messaging platform QQ, digital content, such as Tencent Games and Tencent Pictures, and its fintech offerings like Weixin Pay and Credit Card Repayment. Tencent also focuses on AI and aims to be a leader in retail, health care, education, and transport.

This article looks at the company's stock along with its businesses and most popular offerings.

Key Takeaways

  • Tencent is one of China's largest technology companies.
  • The company was founded in 1998 and is based in Shenzhen, China.
  • Tencent went public in 2004 on the Hong Kong Stock Exchange and ADRs trade in the U.S. over-the-counter.
  • It operates e-commerce, cloud computing, entertainment, internet platforms, operational platforms, and business ecosystems.
  • The company's revenue and profit have climbed steadily since it went public.

Financial Details

Originally a private company, Tencent went public on June 16, 2004. The stock, which trades in Hong Kong dollars, was listed on the Stock Exchange of Hong Kong's main board under the ticker symbol 0700. The initial public offering (IPO) was priced at HK$3.70 per share, with the expectation of raising HK$1.55 billion. The company's market capitalization was expected to range between HK$4.66 billion and HK$6.22 billion.

Share prices closed at HK$600 on May 7, 2021, and were up 4.9% on a year-to-date (YTD) basis. The company's market cap was HK$5.75 trillion and the average trading volume on that date was 25,1 million shares. Investors in the United States can also purchase American depositary receipts (ADRs), which trade under the ticker symbol TCEHY over-the-counter (OTC). In 2018, the company's global music services branch, Tencent Music Entertainment Group, began trading on the New York Stock Exchange (NYSE) under the ticker symbol TME.

Tencent’s revenue and profits have steadily increased. During FY2020, the company reported revenue of RMB 482,064 million, an increase of 27.8% from the previous fiscal. It reported a profit of RMB 122,742 million, an increase of 30.1% compared with the results for the previous year. The company's financial performance is listed in the chart below between fiscal years (FY) 2015 and 2020. 

Tencent Financial Results FY2015 to FY2020
(RMB Million) FY15 FY16 FY17 FY18 FY19 FY20
Revenue 102,863 151,938 237,760 312,694 377,289 482,064
Net Income 28,806 41,095 71,510 78,719 94,351 122,742

Business Segments

Tencent's corporate structure is divided into six different groups. They are listed in alphabetical order below:

  • Corporate Development Group: This segment is responsible for the development and exploration of new businesses, including financial technology, advertising, and marketing.
  • Cloud & Smart Industries Group: This group caters to the company's internet and cloud services.
  • Interactive Entertainment Group: The IEG oversees Tencent's interactive entertainment offerings, including its video games and online sports.
  • Platform & Content Group: PCG oversees Tencent's proprietary internet platform, integrating it with its social, content, and traffic platforms. This includes social media QQ and QZone, its app store, news, live streaming, and movies.
  • Technology Engineering Group: This segment helps the company's operational platforms and is the provider of Asia's largest networking, devices, and data center.
  • Weixin Group: This is a segment that is responsible for the company's Weixin business ecosystem.

Tencent began as a PC-based messaging service when it first started out.

Business Highlights

As mentioned above, Tencent’s products and services include instant messaging service, online media, wireless internet value-added services, interactive media service, social apps, online advertising, and cloud services. The company’s leading and most popular internet platforms in China are:

  • QQ Instant Messenger: A one-stop solution for all internet-based instant messaging needs. It supports text messaging, video, and voice chat as well as online (offline) file transmission. QQ had 768 million monthly active user accounts (MAU) on smart devices as of March 2020.
  • Weixin/WeChat: This is one of the world’s fastest-growing social apps, released by Tencent in 2011. The platform brings together messaging, social communication, and games all within one easy-to-use app. The combined MAU of Weixin and WeChat were 1.2 billion as of March 2020.
  • Qzone: The next-generation personalized multimedia space exclusively owned by users, built around three major content categories. These include self-expression, content sharing, and peer interaction.
  • Business Tenpay: This is China’s leading online payment platform, providing an integrated payment service for B2B e-commerce platforms.
  • Tencent Music Entertainment Group: This segment is made up of a series of apps with more than 800 million MAU. Features include online music, karaoke, and live streaming. The service had more than 40 million songs in its library as of the end of 2019.
  • Tencent Pictures: Founded in 2015, this branch of the entertainment division provides video content. This segment covers everything from production to distribution and promotion. It is also responsible for copyrighting and licensing. Tencent Pictures owns a total of six studios.

The Bottom Line

China’s consumer spending and fast-growing internet reach and usage have added to Tencent’s success. The country's leadership has placed special emphasis on its technology and internet sector which has encouraged many huge rounds of investment in companies operating in the space. Overall, China’s political and economic focus on the sector combined with Tencent’s commitment to enhance its innovative capabilities should bring the best to its customers as well as investors.

The author has no holdings in the stocks mentioned.