ByteDance raked in a record underlying profit last year, overtaking China’s long-reigning tech giants Tencent and Alibaba for the first time even as losses mounted for its fast-growing TikTok business unit.

The world’s most valuable private company posted a 79 per cent surge in earnings before interest, tax, depreciation and amortisation, its preferred metric for profitability, to about $25bn in 2022, up from about $14bn the year earlier, according to two investors briefed on the numbers.

ByteDance’s profit came on the back of almost $85bn in sales in 2022, up more than 30 per cent from a year earlier, as advertisers increased spending on the fast-growing TikTok viral video platform and its sister Chinese app Douyin.

This rise has helped ByteDance, which was valued at $300bn last year, surpass China’s listed tech giants, Tencent and ecommerce group Alibaba, which reported ebitda of $23.9bn and $22.5bn for 2022, respectively. Both groups have been hit hard by Beijing’s two-year regulatory crackdown on the country’s tech giants.

ByteDance’s explosive growth comes as TikTok faces mounting security concerns from governments and regulators around the world. The US government has called for a ban or divestiture of the short-form video app.

TikTok chief executive Shou Zi Chew defended the app in a congressional hearing last month, saying it would be kept “free from any manipulation by any government”. Beijing has said it would “firmly” oppose any move to separate TikTok’s US arm from its Chinese owners.

Any forced sale or ban of TikTok would hit ByteDance’s potential earnings. Although it generated about 80 per cent of its revenues in China last year and TikTok was lossmaking, it nonetheless represents an important future profit engine.

A ByteDance investor in the US said a TikTok ban would not gut the company’s financials based on current earnings. “TikTok is not as material a percentage of ByteDance’s total revenue as people assume. But the ban would be a real loss to future potential given its growth rate,” the investor said.

ByteDance’s international business, which includes TikTok, recorded about $15bn in sales for 2022, more than double from a year earlier. China revenues came in at about $70bn, another investor said.

ByteDance does not disclose its revenues and profitability figures and did not respond to a request for comment. Founded in 2012 by entrepreneur Zhang Yiming, it was valued at about $300bn last summer when it conducted a share buyback from its employees.

Investors in the company appear to have shrugged off the threat of an imminent US TikTok ban or forced divestiture, which legal experts said would be challenging to implement and was likely to get bogged down in courts.

“There is a lot of value in the company. We view an outright ban as extremely unlikely,” said one executive at a fund that backed the Chinese tech group.

But the political cloud hanging over ByteDance has damped prospects for its initial public offering. It has already postponed its planned Hong Kong stock market flotation a number of times after Beijing launched a sweeping tech crackdown in late 2020 with the cancellation of Ant Group’s IPO.

The US-based tech investor said there was no clarity about the IPO timeline. “TikTok has to be sorted out first,” they said. “And everyone wants to see the Ant Financial problem resolved before any ByteDance IPO.”