Financial Data and Key Metrics Changes - Total revenue for the second quarter was RMB185 billion, representing a 15% year-on-year increase [7] - Gross profit reached RMB105 billion, up 22% year-on-year [7] - Non-IFRS operating profit was RMB69 billion, an 18% increase year-on-year [7] - Non-IFRS net profit attributable to equity holders was RMB63 billion, up 10% year-on-year [7] - Excluding associated profit contributions, underlying net profit would have increased by 20% year-on-year [7][30] - Overall gross margin improved to 57%, up four percentage points year-on-year [31] Business Line Data and Key Metrics Changes - Value-added services (VAS) revenue was RMB91 billion, up 16% year-on-year [12] - Social networks revenue increased by 6% year-on-year, driven by app-based game item sales and music subscriptions [13] - Domestic games revenue grew by 17% year-on-year, supported by titles like Delta Force and Honor of Kings [14] - International games revenue surged by 35% year-on-year, driven by Supercell's games and PUBG Mobile [15] - Marketing services revenue grew 20% year-on-year to RMB36 billion, benefiting from AI-powered ad tech upgrades [23] - FinTech and business services revenue was RMB56 billion, up 10% year-on-year [24] Market Data and Key Metrics Changes - Combined monthly active users (MAU) of Weixin and WeChat reached 1.4 billion, showing growth year-on-year and quarter-on-quarter [8] - GMV facilitated by Mini Programs grew by a teens percentage year-on-year [15] - Mini games' total gross receipts increased by 20% year-on-year [15] - Weixin search revenue grew around 60% year-on-year due to enhanced ad relevance [24] Company Strategy and Development Direction - The company is focusing on integrating AI across its platforms to enhance user experience and drive revenue growth [5][6] - There is a strong emphasis on developing evergreen games and expanding the gaming portfolio to reduce volatility [18][82] - The company aims to leverage AI capabilities to improve advertising performance and user engagement [23][39] - The strategy includes enhancing the functionalities of AI-native applications like Yanbao and improving the overall ecosystem [17][47] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of advertising revenue, driven by AI enhancements [39] - The company noted that the gaming market in China is evolving, with increasing demand for both live service and AAA games [58][96] - Management highlighted the importance of maintaining a balance between AI investment and cost management [61][104] - The company anticipates sustained growth in commercial payment volume, driven by improved transaction dynamics [91] Other Important Information - The company reported a significant increase in operating CapEx, reaching RMB19.1 billion, up 119% year-on-year, primarily due to investments in AI capabilities [33] - Free cash flow was RMB43 billion, up 7% year-on-year, driven by growth in games gross receipts [34] - The net cash position was RMB74.6 billion, down 17% quarter-on-quarter due to dividend payments [34] Q&A Session Summary Question: Potential of marketing services and advertising growth - Management believes there is a long runway for advertising revenue growth, driven by improved click-through rates and traffic [38][39] Question: Consumer behavior changes with AI features - Management noted that AI features enhance user satisfaction and efficiency, with minimal negative impact on traditional content consumption [45][46] Question: Impact of new advertising law on gaming companies - Management does not expect a meaningful impact from the new advertising regulations, citing broad-based growth in advertising revenue [70] Question: Business services revenue growth and GPU allocation - Management indicated that business services revenue growth is broad-based and not solely dependent on GPU availability [76] Question: AAA gaming growth in China - Management sees potential for AAA games in China but believes live service games will remain the majority of the market [58][96]

Core Insights - The company reported a revenue of 543.8 billion yuan for the first half of 2025, with service revenue at 467 billion yuan, showing a year-on-year growth of 0.7% [1] - The total number of connections reached 3.815 billion, marking an 8.9% year-on-year increase [1] - The company achieved a net profit attributable to shareholders of 84.2 billion yuan, reflecting a year-on-year growth of 5.0% [1] Revenue Breakdown - The personal market revenue was 244.7 billion yuan, down 4.1% year-on-year, while the mobile customer base reached 1.005 billion, with a net increase of 560,000 [1] - The family market revenue increased by 7.4% year-on-year to 75 billion yuan, with family broadband customers reaching 284 million, a net increase of 6.23 million [1] - The government and enterprise market revenue was 118.2 billion yuan, up 5.6% year-on-year, with the number of enterprise customers reaching 34.84 million, a net increase of 2.25 million [1] Emerging Business Growth - Emerging market revenue grew by 9.3% year-on-year to 29.1 billion yuan, with international business revenue at 14 billion yuan, up 18.4% [2] - Digital content revenue reached 14.9 billion yuan, while financial technology's industrial chain finance business scaled to 47.1 billion yuan, reflecting a year-on-year growth of 24.5% [2] - Investment income from strategic emerging industries amounted to 7.2 billion yuan, showing a year-on-year increase of 17% [2] Investment Outlook - The target price for the company has been raised to 116 Hong Kong dollars, maintaining a "buy" rating due to its strong brand value and profitability [3] - The company is expected to attract long-term funds, including insurance capital, due to its stable and sustainable revenue and profit growth [3] - The stable dividend policy and attractive dividend yield further enhance the company's investment appeal [3]

Group 1 - The 21st China (Shenzhen) International Cultural Industries Fair opened with 120,000 cultural products on display and over 4,000 investment and financing projects available for transaction [1] - The fair focuses on exploring effective mechanisms for the integration of culture and technology, emphasizing the exhibition and transaction functions while enhancing internationalization, marketization, professionalism, and digitalization [1][2] - The event features a new artificial intelligence exhibition area with over 60 AI companies participating, showcasing immersive experiences through robotics, drones, and smart devices [2][3] Group 2 - Guangdong Province has been promoting the integration of culture and technology, implementing various policies to support the rapid development of digital cultural technology and new cultural business models [3] - Shenzhen's cultural industry has seen significant growth, with 3,754 cultural enterprises achieving a revenue of 1,287.51 billion yuan in 2024, accounting for 51.5% of the province's total and 9.1% of the national total [3] - Emerging cultural industries such as digital creativity, short dramas, and immersive experiences are rapidly developing, becoming new growth drivers for Shenzhen's cultural sector [3] Group 3 - The fair includes specialized exhibition areas for cultural exports and imports, helping companies with export potential to showcase their products [4] - Notable companies like Pop Mart are using unique IP strategies to promote Chinese brands internationally, while major players like Tencent and NetEase are showcasing their cultural export products [4] - The fair attracted 305 overseas exhibitors from 65 countries and regions, with an expected attendance of 35,000 overseas professionals [5] Group 4 - The fair aims to enhance the "monetization capability" of the cultural industry by creating various "super platforms" for transactions, investment, and cultural product promotion [6] - A total of 22 transaction promotion measures have been implemented to enhance the trading experience for participating companies [6][7] - The event will host nearly 200 activities, including product launches and investment meetings, and has doubled the number of release areas compared to the previous year [7]