Tencent's Revenue Beats Estimates in Boost for AI Ambitions
Revenue for the three months ended June rose to 184.5 billion yuan ($25.7 billion), versus an average estimate of 179 billion yuan. Net income for the period came to 55.6 billion yuan, compared with projections for 50.8 billion yuan.
China's most valuable company is accelerating spending on AI research and product rollouts after a string of rivals launched open-sourced models to compete with the likes of OpenAI and Anthropic. The Shenzhen firm counts on marquee gaming franchises and super-app WeChat to fund such initiatives. Yet a potential global downturn this year — coupled with the Trump administration's tariffs campaign – threatens to hurt Tencent's sprawling online businesses from payments to advertising and cloud computing.
The world's biggest games publisher kicks off a closely watched earnings season for Chinese big tech firms, which are riding investor euphoria around the breakout success of DeepSeek. After years of regulatory scrutiny and Covid-era disruption, the country's biggest tech firms are once again ramping up deals and competing fiercely for users to propel growth. Like Big Tech in the US, much of the industry's attention is also focused on how to invest in AI — and monetize it.
Tencent alone has gained more than $170 billion this year, though some analysts think it remains undervalued relative to peers such as Meta Platforms Inc.
The company's AI efforts include integrating DeepSeek's R1 and own Hunyuan model into a suite of products and games, while renting out computing to clients keen to train or run AI systems. Yet its 30% gain in 2025 that trails Alibaba Group Holding Ltd.'s, whose Qwen family of models consistently ranks among the industry's top performers.
What Bloomberg Intelligence Says
Tencent's earnings growth is likely to decelerate to about 9% in 2Q, down from 25% during 1Q, following the seasonal peak in its domestic video game business. The internet giant should remain relatively unaffected by US tariffs, though its fintech and ad divisions remain exposed to potential second-order effects, should China's economic growth slow in 2H. Tencent's growth is set to normalize this year after an exceptional 2024, with earnings growth due to decelerate to the mid-teen percentage range. Geopolitical pressure and rising economic headwinds present risks to 2H, though Tencent is better positioned to navigate these than its e-commerce peers.
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Tencent is trying to sustain growth at its games division, still the largest source of the company's revenue. It scored some of 2024's biggest hits from DnF Mobile to Delta Force.
Beyond earnings, the market is looking forward to next Tuesday's launch of Valorant Mobile, a highly-anticipated smartphone version of Riot Games Inc.'s seminal title. The title should help drive Tencent's revenue from later this year through the first half of 2026, according to Goldman Sachs Inc. Other upcoming titles include an open-world game set in the Honor of Kings universe. The company is set to unveil new ones next week at Gamescom in Germany.
It's also more focused on protecting margins than some of its rivals. Tencent has stayed out of an increasingly cutthroat battle in e-commerce, where Alibaba, Meituan and JD.com Inc. have sought to outspend each other with subsidies. The trio is slated to report earnings in coming weeks, starting with JD.com on Thursday.
With a billion-plus users, WeChat remains Tencent's most dependable asset as it shoulders more burdens on monetization in areas from mini-games to advertising.
The ubiquitous Chinese app is carrying more advertising within features like search and short-video feeds, chipping away at TikTok-owner ByteDance Ltd.'s key revenue stream. Yet WeChat Pay faces a renewed battle with Alibaba-affiliate Ant Group Co., which has garnered 100 million users for a tap-to-pay feature at stores and restaurants.
Tencent hopes WeChat will remain the killer app of the generative AI era. Its unique ecosystem of mini-programs, executives argue, could evolve to become an operating system for agentic AI tools that autonomously perform tasks on behalf of users. The company has rolled out a series of AI tools for game designers to generate in-game avatars and assets.
--With assistance from Luz Ding, Henry Ren, Vlad Savov, Ville Heiskanen and Amy Thomson.
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