TENCENT(700.HK)3Q25RESULTS：SOLID GROWTH ACROSS BUSINESS LINES; UPBEAT ON LONG-TERM AI OPPORTUNITIES

Core Insights - Tencent's total revenue for 3Q25 increased by 15% YoY to RMB192.9 billion, surpassing Bloomberg consensus and internal estimates, driven primarily by a 23% YoY growth in games revenue [1] - Non-IFRS operating income rose by 18% YoY to RMB72.6 billion, aligning with expectations despite higher-than-anticipated operating expenses [1] - The company has reduced its FY25 capex guidance due to supply chain constraints but remains focused on accelerating AI applications across various sectors [1] Group 1: Gaming Revenue - Games revenue grew by 23% YoY to RMB63.6 billion in 3Q25, supported by strong international business performance [1] - Domestic games revenue increased by 15% YoY to RMB42.8 billion, driven by evergreen titles and contributions from Delta Force [1] - International games revenue surged by 43% YoY to RMB20.8 billion, mainly due to Supercell's games and newly acquired studios [1] Group 2: Marketing Services - Marketing services revenue rose by 21% YoY to RMB36.2 billion in 3Q25, fueled by higher ad impressions and effective eCPMs [2] - Increased user engagement and ad load across Video Accounts and Mini Programs contributed to solid growth in ad impressions [2] - The launch of AIM+, an automated ad campaign solution, enhanced ads ROI through improved targeting [2] Group 3: Fintech and Business Services - Fintech and Business Services (FBS) revenue increased by 10% YoY to RMB58.2 billion in 3Q25, with fintech revenue showing high-single-digit growth [3] - Growth in commercial payment volume and consumer loan services supported fintech revenue [3] - Business services revenue grew in the teens percentage YoY, driven by AI cloud and e-commerce services [3] Group 4: Capital Expenditure and Operating Metrics - Non-IFRS operating profit margin (OPM) improved by 1 percentage point YoY to 37.6% in 3Q25 due to operating leverage [3] - Sales and marketing (S&M) and R&D expenses increased by 22% and 28% YoY, respectively, reflecting heightened promotional and R&D efforts for AI initiatives [3] - Total capex decreased by 24% YoY to RMB13.0 billion, with FY25 capex expected to be lower than previous guidance but higher than FY24 levels [3]