ByteDance grew a record underlying profit last year, overtaking China’s long-reigning tech giants Tencent and Alibaba for the first time ever, even as losses for its fast-growing TikTok business unit widened. Went.
The world’s most valuable private company reported a 79 per
cent jump in earnings before interest, taxes, depreciation and amortisation,
its preferred metric for profitability, to around $25bn in 2022, up from almost
a year earlier. was more than $14bn, two investors briefed on the numbers said.
ByteDance’s profit came in 2022 with sales of nearly $85bn,
up 30 per cent from a year earlier, as advertisers boosted spending on the
booming viral video platform TikTok and its sister Chinese app Douyin.
This growth has helped ByteDance, which was valued at $300bn
last year, overtake China’s listed tech giants Tencent and ecommerce
conglomerate Alibaba, which reported EBITDA of $23.9bn and $22.5bn for 2022,
respectively. Both groups have been hit hard by two years of Beijing’s
regulatory crackdown on the country’s tech giants.
ByteDance’s explosive growth comes as TikTok faces growing
security concerns from governments and regulators around the world. The US
government has called for a ban or removal of the short-form video app.
TikTok chief executive Shou Zi Chew defended the app at a
congressional hearing last month, saying it would be kept “free from any
manipulation by any government”. Beijing has said it will “firmly” oppose any
move to separate the US branch of TikTok from its Chinese owners.
A forced sale or ban of TikTok would impact ByteDance’s
potential earnings. Although it generated about 80 percent of its revenue in
China last year and TikTok was loss-making, it still represents an important
future profit engine.
An investor in ByteDance in the US said that the ban on
TikTok will not affect the company’s financials based on current earnings.
“TikTok is not as material as a percentage of ByteDance’s total revenue as
people believe. But the ban would be a real detriment to its future prospects
considering its growth rate,” said the investor.
ByteDance’s international business, which includes TikTok,
projects sales of nearly $15 billion in 2022, more than doubling from a year
ago. Another investor said China’s revenue was around $70 billion.
ByteDance did not disclose its revenue and profitability
figures and did not respond to a request for comment. Founded in 2012 by
entrepreneur Zhang Yiming, it was valued at nearly $300 billion last summer
when it did a share buyback from its employees.
The company’s investors appear to have shrugged off the
threat of an imminent US TikTok ban or forced disinvestment, which legal
experts said would be challenging to implement and likely to get stuck in the
courts.
“There is a lot of value in the company. We view a complete
ban as highly unlikely,” said an executive of a fund backing the Chinese tech
conglomerate.
But the political cloud hanging over ByteDance has clouded
its prospects for an initial public offering. It has already postponed its
planned Hong Kong stock market flotation several times after Beijing launched a
sweeping tech crackdown in late 2020, including the cancellation of Ant Group’s
IPO.
The US-based tech investor said there is no clarity on the
timeline for the IPO. “TikTok has to be sorted out first,” he said. “And
everyone wants to see the Ant financial problems resolved before any ByteDance
IPO.”