TENCENT HOLDINGS(700.HK)：1Q25 CLEAN BEAT;PROFOUND VIRTUOUS CYCLE FROM ACCELERATED AI INVESTMENTS AND PROGRESSIVE MONETISATIONS

Core Viewpoint - The company demonstrated strong performance in 1Q25 with a 13% year-over-year revenue growth, driven by AI implementations and efficiency improvements, leading to an uplifted target price of HK$634.0 and a reiteration of the top BUY recommendation [1][4]. Group 1: Financial Performance - Total revenue reached RMB180.0 billion, marking a 13% year-over-year increase, which exceeded consensus estimates by 3% [3]. - Domestic and overseas games revenue grew by 24% and 22% year-over-year, respectively, outperforming estimates by 6% and 8% [3]. - Advertising revenue increased by 20% year-over-year, significantly boosted by video accounts, mini programs, and Weixin search [3]. - Adjusted core operating profit grew by 17% year-over-year, with an adjusted core operating profit margin of 34% [3]. Group 2: AI and Growth Strategy - The company is accelerating AI investments and integrations within its social ecosystem, aiming to meet diverse participant demands and enhance monetization [2]. - A virtuous cycle has been established through high-margin revenue streams, which are being reinvested into AI developments [2]. - Forecasts for FY2025-27E VAS game revenue have been raised by 3-4%, reflecting strong performance from evergreen titles and updated pipelines [2]. Group 3: Valuation and Recommendations - The target price has been lifted to HK$634.0 based on updated estimations, maintaining the same valuation multiples for each segment [4]. - The company continues to be viewed positively, with a reiteration of the BUY rating based on strong financial performance and growth prospects [4].