Tencent Reports Robust Q2 with Double-Digit Gains in Revenue and Profit, Powered by Gaming and AI Investments

TradingKey - On August 13, Tencent Holdings released its financial report for the second quarter. The data showed a 15% year-on-year increase in revenue, reaching 184.5 billion yuan, and a 17% rise in net profit, totaling 55.6 billion yuan, both figures exceeding expectations.

The gaming sector stood out as a significant contributor, remaining the largest source of revenue. Revenue from value-added services rose 16% year-on-year to 91.4 billion yuan, driven by strong growth in both domestic and international gaming markets. 

Domestic game revenue increased by 17% to 40.4 billion yuan, supported by the recent hit release "Delta Force" and the ongoing success of evergreen games like "Honor of Kings," "Peacekeeper Elite," and "Valorant." International gaming revenue also saw a remarkable growth of 35%, reaching 18.8 billion yuan.

Furthermore, AI is becoming a new growth driver for Tencent. Tencent Chairman Pony Ma stated that the company continues to invest in AI and reap its benefits. The financial report highlighted the significant impact of AI in advertising, as upgrades to advertising base models have enhanced click-through and conversion rates, pushing marketing services revenue up by 20% year-on-year to 35.8 billion yuan, surpassing the industry average.

Tencent’s investment in AI is also increasing. R&D expenses grew by 17% year-on-year to 20.25 billion yuan in Q2, demonstrating its strong commitment to building AI infrastructure. Due to investments in AI upgrades in advertising, gaming, and WeChat, capital expenditure surged by 119% year-on-year to 19.1 billion yuan, significantly surpassing the 8.7 billion yuan from the same period last year.

Bloomberg noted that since the breakthrough success of DeepSeek earlier this year, Chinese tech giants have focused on monetizing AI investments. Tencent is keen not to miss the wave of large AI models, but unlike others, it emphasizes integrating technology into its business and content. Tencent has incorporated third-party models, such as DeepSeek's R1, into its AI assistant, Yuanbao, and applied its self-developed HunYuan model across various products and games. Tencent Cloud also leases computing resources for AI model training to clients. This integration has enhanced the company’s existing business with AI benefits.

Bloomberg predicts Tencent’s profit growth will slow to approximately 15% this year due to escalating geopolitical issues and economic downturns, which might threaten its operations ranging from payments to advertising and cloud computing. However, Bloomberg points out that Tencent is better equipped than its peers to handle these risks.

On Wednesday, Tencent’s Hong Kong shares (0700.HK) rose 4.74% to a four-year high; as of the time of writing, Tencent’s US shares (TCEHY) were up 4.75% in pre-market trading.