Ge Long Hui·2025-08-14 18:41Core Insights - The company reported a total revenue increase of 15% year-on-year to 184.5 billion RMB in Q2 2025, exceeding market expectations by 4% and 3% respectively [1] - Gross profit increased by 22% year-on-year, with a gross margin improvement of approximately 3.6 percentage points to 57%, driven by high-margin businesses such as domestic games, video accounts, and cost optimization in payment and cloud services [1] - Adjusted earnings per share rose by 13% year-on-year to 6.79 RMB, surpassing market expectations by 5% and 3% [1] Revenue Breakdown - Domestic game revenue grew by 17% year-on-year, benefiting from the new game "Delta Operation" and revenue growth from several evergreen games [1] - Overseas game revenue surged by 35%, significantly exceeding expectations, with strong performances from "PUBG MOBILE" and Supercell games, along with contributions from the new game "Dune: Awakening" [1] - Social revenue increased by 6% year-on-year, driven by mobile game item sales, video account live service revenue, and music subscription growth [1] - Marketing revenue maintained a 20% year-on-year growth rate, supported by enhanced advertising effectiveness from upgraded base models, leading to strong demand for video account, search, and mini-program advertisements [1] - Financial technology revenue saw single-digit growth, with a recovery in commercial payment transaction volume; enterprise service revenue accelerated due to increased demand for AI-related services [1] Future Outlook and Valuation - The company's strong Q2 performance boosts market confidence in sustained business growth, with projected overall revenue growth of 11% for Q3, compared to the previous market expectation of 10% [2] - Revenue growth rates for social, gaming, financial services, and marketing are expected to be 7%, 13%, 7%, and 18% respectively, driven by evergreen games, new game releases, financial services, and increased demand for cloud and API services [2] - Despite ongoing investments in AI, the company aims to balance cost control and profitability, with profit growth expected to continue outpacing revenue growth [2] - Revenue and profit forecasts for 2025-2027 have been raised by 2%-3% and 2%-10% respectively [2] - The valuation has been adjusted to a 20x price-to-earnings ratio for 2026, with a target price increase to 700 HKD, maintaining a buy rating [2]