Tencent Q2 revenue climbs 11% on AI-driven ad gains, but profit falls short

Beijing, Aug 12 - Tencent Holdings saw an 11% increase in revenue for the second quarter, fueled by robust advertising sales and stable gaming income, as the company intensifies its AI investments. However, net profit only grew by 0.7% year-over-year to 56 billion yuan ($8.31 billion), missing analysts' forecasts of 61.8 billion yuan.

For the three months ended June, the company's revenue stood at 204.8 billion yuan, matching expectations of 202.2 billion yuan from LSEG data. Investors are closely monitoring whether Tencent's aggressive AI spending is starting to pay off or merely impacting margins.

The company's capital expenditure surged to 79 billion yuan in the previous year, up from 77 billion yuan in 2024, with further AI investments expected in the latter half of the year. Tencent's President, Martin Lau, expressed confidence in the company's AI investments, stating that even renting out its compute capacity alone would be profitable. The results were presented alongside Tencent's growing AI product lineup, including the Yuanbao chatbot and WorkBuddy office assistant.

Revenue from value-added services, encompassing Tencent's gaming business, rose 8% to 98.4 billion yuan. Domestic games revenue expanded 17% to 47.3 billion yuan, propelled by popular titles like 'Honor of Kings' and 'Delta Force.' International games revenue declined 0.8% to 18.6 billion yuan due to currency fluctuations. Marketing services revenue climbed 22% to 43.6 billion yuan, as AI enhancements continue to enhance advertising and pricing within Tencent's Weixin ecosystem, which integrates messaging, payments, and social media services.

Fintech and business services revenue increased 9% to 60.3 billion yuan, with demand for AI-related cloud services remaining a critical driver. In July, Tencent launched Hy3, the latest version of its Hunyuan AI model, making it accessible to users worldwide. The company has also been testing an AI assistant within its WeChat social media app since June.