Tencent Holdings posted its fastest pace of revenue growth in more than a year, after a string of gaming hits helped China’s most valuable company overcome a persistent economic downturn.
Revenue for the three months ended December rose to 172.5 billion yuan ($23.8 billion), versus an average estimate of 168.7 billion yuan. Net income for the period came to 51.3 billion yuan, compared with projections for 43.9 billion yuan. The company also unveiled plans to buy back at least HK$80 billion worth of shares for 2025, and proposed a 32% rise in its annual dividend.
The world’s biggest games publisher scored last year with game releases from Nexon Co.’s Dungeon & Fighter Mobile to its own PC shooter Delta Force — titles it intends to grow into so-called evergreen franchises that can generate steady cash. That might help take the heat off other parts of Tencent’s internet portfolio, where businesses like advertising and payments are grappling with cautious consumer spending.
Tencent is among several major Chinese tech names to report this week, wrapping up a closely watched earnings season for a trillion-dollar sector that’s rounding a corner. President Xi Jinping last month met with prominent entrepreneurs including Tencent chief Pony Ma and Alibaba Group Holding Ltd. co-founder Jack Ma, signaling Beijing’s softening stance toward a private sector it assailed over three years. Also in attendance were a new generation of founders representing industries like chipmaking, electric vehicles and AI, echoing Xi’s priorities during a tech face-off against the US.
Chinese AI was thrust into the global spotlight at the start of the year after Hangzhou-based DeepSeek launched an AI model that rivals OpenAI’s while needing much less computing resources. The Chinese startup’s R1 has triggered soul-searching among Chinese tech giants, who’re ramping up the release of similar model upgrades or raising investments in AI infrastructure. Alibaba has pledged to spend more than $50 billion on its AI and cloud computing networks over the next three years, declaring human-like AI capabilities its primary objective.
What Bloomberg Intelligence Says
The firm risks disappointing the optimistic side of consensus as we doubt the company will generate significant incremental earnings from AI this year. Tencent faces a more challenging 2025 given the risk of further US sanctions following the US Department of Defense’s decision to blacklist the firm in January.
Rising economic headwinds are another risk, though Tencent is better positioned to navigate these than its internet and e-commerce peers. Tencent’s profit momentum is set to normalize this year following an exceptional 2024, with EPS growth due to decelerate to a low double-digit percentage range in 2025, down from around 37 percent last year.– Robert Lea, analyst
Tencent, too, is playing catch-up. The company has integrated DeepSeek’s open-sourced models into a wide range of services including WeChat search and its chatbot Yuanbao, which at one point became the country’s most downloaded free app on iPhone. Even with Peacekeeper Elite, one of Tencent’s two biggest gaming titles, DeepSeek forms the foundation of a new virtual assistant that teaches players how to shoot. On Tuesday, it released new AI services that turn text or images into 3D visuals and graphics, potentially streamlining the often lengthy and costly studio development process.
“Tencent has historically caught up at a later stage, narrowing the market share gap or even surpassing the first mover, backed by its unique WeChat ecosystem,” Goldman Sachs analysts including Ronald Keung wrote in a note before the results. Super-apps like WeChat and ByteDance Ltd.’s Douyin are “best positioned” to tap into AI application or agent opportunities, they said.
Beijing’s latest vow to boost consumption has added further momentum to the tech-led rally in Chinese equities. It’s also turning attention to how the internet firm co-founded by billionaire Pony Ma plans to commercialise AI to complement its chat app, game and internet advertising businesses.
With a billion-plus users, WeChat remains Tencent’s most dependable asset as it takes on a bigger monetization role in areas from advertising to mini-games and online commerce. It also reflects the economic environment via services like ride-hailing and meal delivery — though the fintech division that incorporates that payments network is now Tencent’s most stagnant unit.
In terms of gaming, Tencent joins global peers in slashing development jobs while realigning its focus on fewer key titles.
Its pipeline remains strong with a handful of likely 2025 hits including Honor of Kings: World, Monster Hunter Outlanders, and the China release of Goddess of
Tencent gained roughly $136 billionCK — or 27 percent — in market valuation so far this year, helped by a broader Chinese tech rally induced by the rise of DeepSeek.
Still, it lags behind a 70 percent —plus jump in shares of arch-rival Alibaba as well as the Hang Seng Tech Index. — Bloomberg News
