Core Insights - Tencent reported Q3 2025 revenue of 192.87 billion RMB, a 15% increase year-over-year from 167.19 billion RMB in Q3 2024 [1] - Operating profit reached 63.55 billion RMB, up 19% year-over-year, while adjusted net profit was 70.55 billion RMB, an 18% increase [1] - For the first three quarters of 2025, total revenue amounted to 557.40 billion RMB, a 14% increase compared to 487.81 billion RMB in the same period of 2024 [1] Gaming Business Performance - Tencent's gaming revenue for Q3 was 63.60 billion RMB, with domestic market revenue at 42.80 billion RMB (15% growth) and international market revenue at 20.80 billion RMB (43% growth) [1][4] - International gaming revenue accounted for 33% of total gaming revenue, marking the highest growth rate since the segment began disclosing performance separately [4] - The growth in international revenue was driven by Supercell's game performance and contributions from recently acquired game studios, particularly the success of "Dying Light: Stay Human" [4] Key Game Titles and Innovations - Supercell's titles, including "Clash Royale" and "Brawl Stars," achieved record highs in daily active users and revenue, contributing to international growth [4] - "Dying Light: Stay Human," released by Techland, has seen pre-orders exceed 1 million, with estimated total sales surpassing 1.5 million [4][6] - Tencent's long-standing games like "Honor of Kings" and "Peacekeeper Elite" continue to drive growth, with "Peacekeeper Elite" achieving a peak DAU of 37 million [6][10] Future Outlook - Tencent's gaming segment is expected to maintain steady growth, with upcoming titles like "Ultimate Showdown" and "Rock Kingdom: World" set to launch in Q4 [12] - The company is focusing on a diverse gaming ecosystem, leveraging long-term strategic investments in R&D, global expansion, and product innovation [10][12]

Core Insights - Tencent reported a total revenue of 636 billion yuan from its online gaming business in Q3 2025, with domestic market revenue at 428 billion yuan, reflecting a 15% year-on-year growth, while international market revenue reached 208 billion yuan, showing a 43% increase [1][2] Domestic Market Performance - The growth in the domestic market was primarily driven by the revenue contributions from newly released games such as "Delta Action" and the sustained performance of evergreen titles like "Honor of Kings" and "Peacekeeper Elite" [1] - "Delta Action" ranked among the top three in industry revenue for the quarter, with over 30 million daily active users reported in September [1] - "Honor of Kings" surpassed 139 million daily active users in October, benefiting from the S41 season activities launched during the National Day holiday [1] International Market Performance - Tencent's overseas gaming revenue growth was attributed to increased income from Supercell's games, contributions from acquired game studios, and strong sales of the newly released "Dying Light: The Beast" [2] - Supercell's titles, including "Brawl Stars" and "Clash Royale," saw significant increases in active users and revenue, with "Clash Royale" achieving a new high in daily revenue in September, exceeding 750 million yuan, marking a 360% year-on-year growth [2] - The new 3A title "Dying Light: The Beast," developed by Techland, quickly topped the global Steam sales chart after its release, contributing to Tencent's overseas revenue growth [2] Competitive Strength of Domestic Products - Tencent's self-developed products demonstrated strong competitiveness in overseas markets, with "Honor of Kings" announcing over 260 million global monthly active users during its 10th anniversary celebration [2] - "Delta Action" was launched on PS5 and XBOX platforms in August, becoming the first domestically developed cross-platform shooting game released globally [2]

Core Insights - The development of "Squad Busters" will end, with the final update scheduled for December 2025, as the game did not meet Supercell's long-term quality standards despite initial success [2][4][5] - Supercell acknowledges the lessons learned from the failure of "Squad Busters" and emphasizes the importance of creating games that players can enjoy for years [3][5][16] - The decision to cease development was made after months of reflection, as the game failed to maintain its player base and did not evolve into a global phenomenon [3][10][23] Summary by Sections Game Launch and Initial Reception - "Squad Busters" launched in May 2024 and initially attracted millions of players, leading to optimism about its potential success [1][9] - The game received positive feedback at launch, which led Supercell to believe it could become a major hit alongside their other successful titles [2][9] Development Challenges - Despite efforts to address core issues, including the introduction of a new "Heroes" system, the game could not find a lasting solution to its problems [3][10] - By early 2025, Supercell faced a critical decision point regarding the game's future, ultimately opting for a bold creative change that did not yield the desired results [3][10] Conclusion of Development - The decision to end active development was described as extremely difficult, with a final update planned for December 2025, after which the game will remain available for a limited time before being closed in 2026 [4][5][20] - Supercell aims to redirect the talented team behind "Squad Busters" to new projects and existing successful games to enhance player experiences [6][11] Player Transition and Rewards - In-app purchases were disabled on October 30, 2025, and players can transfer their purchases to other Supercell games starting November 10, 2025 [6][12] - As a gesture of appreciation, players will receive free bundles in other Supercell games based on their playtime in "Squad Busters" [7][14] Industry Context - The announcement of "Squad Busters" ending its operations marks a significant moment for Supercell, which has historically maintained a 100% success rate for new game launches prior to this title [22][23] - Despite the setback, Supercell continues to see success with its established titles, indicating resilience in its long-term game development strategy [29][30]

Core Insights - The Chinese gaming market, despite being perceived as saturated, continues to evolve with the emergence of mini-games, which have shown significant growth in recent years [1][3] - The mini-game market generated revenue of 39.836 billion yuan in the past year, marking a year-on-year growth of 99.18%, with 500 million monthly active users, only 10% of whom overlap with the mobile gaming market [1][3] Group 1: Market Dynamics - The success of mini-games is attributed to their reliance on social platforms, ease of access, and strong social sharing attributes, alongside lower development costs compared to traditional mobile games [3][6] - Currently, 70% of listed gaming companies are investing in the mini-game sector, with notable products like "Endless Winter" and "Seeking the Great Thousand" leading the market [3][6] Group 2: Challenges for Small Teams - The entry of large companies into the mini-game market has increased operational costs, making it harder for small teams, which constitute 80% of the market, to compete [5][6] - As competition intensifies, the marginal returns on purely creative gameplay are diminishing, making it difficult for new mini-games to achieve significant user acquisition without substantial marketing budgets [8][9] Group 3: Opportunities for Small Teams - Despite challenges, small teams remain a vital part of the mini-game ecosystem and can leverage partnerships with larger platforms for support in product development and marketing [9][10] - Companies like ByteDance and Kuaishou are providing financial incentives and technical support to developers, helping to reduce marketing costs and enhance product competitiveness [10][12] Group 4: Evolution of Game Development - The mini-game sector is evolving similarly to the mobile game market, with a shift towards combining creative gameplay with established genres to meet user expectations [6][17] - Traditional mobile game content is increasingly influencing mini-game development, with many existing mobile games being adapted for mini-game platforms [17][19] Group 5: Future Directions - The unique social and high-sharing characteristics of mini-games may lead to distinct developmental paths compared to traditional mobile games, emphasizing the importance of innovation and adaptation to platform features [19][20] - Developers are encouraged to focus on gameplay creativity while relying on professional teams for technical optimization and commercialization, allowing them to carve out a niche in the growing mini-game market [20]

Core Insights - The article discusses how mobile game developers are increasingly directing players to external payment options to avoid Apple's 30% commission, referred to as the "Apple tax" [1][3][12] - A study by Liquid & Grit analyzed over 30 cases of leading mobile game companies like Supercell and Niantic, focusing on their strategies to sell in-app purchases (IAP) directly to players outside of the App Store [1][3] Group 1: Strategies for Redirecting Players - Liquid & Grit categorized the new store designs into four main types: offering web store discounts in the native IAP store, pop-ups, buttons on the main game interface, and using in-game news and email systems for guidance [1][3] - "Social Casino" games are the most proactive in redirecting players to web stores, utilizing all four methods, while other game categories show varied adoption [3][5] - Specific games like "Dragon City" and "PUBG Mobile" employ different strategies, such as banners and pop-ups, to encourage players to use web stores for purchases [5][7] Group 2: Incentives and Challenges - To enhance conversion rates, developers must reduce payment friction and increase player motivation to choose external payment options over Apple’s [11][12] - Companies like Epic Games offer incentives, such as a 20% cash back, to encourage players to opt for web payments [11] - The report suggests that the most effective design so far is the "purchase pop-up," which allows players to complete transactions without leaving the game, thus maintaining a seamless experience [11][12] Group 3: Alternative Payment Solutions - Companies with in-house resources are encouraged to build their own web stores and utilize payment processors like Stripe or Adyen to handle transactions [12] - For developers who prefer not to create their own stores, managed web store service providers like Xsolla and Stash are available, offering a quicker setup at a cost lower than Apple's commission [12]

Group 1: MOMO US - The operating profit exceeded expectations, with overseas new products maintaining strong growth momentum [1] - Revenue for Q2 2025 was 2.62 billion yuan, a year-on-year decrease of 3%, while adjusted operating profit was 450 million yuan, surpassing the expected 390 million yuan due to better-than-expected cost control and marketing channel optimization [1] - Overseas revenue continued to expand, increasing by 73% year-on-year, accounting for 17% of total revenue [1] Group 2: Future Outlook for MOMO US - Revenue for Q3 2025 is expected to decline by 2% year-on-year, with the impact of stricter compliance on streamer taxes leading to potential increases in revenue-sharing incentives [2] - Overseas revenue is projected to grow by 62% year-on-year, with products like Amar and Yaahlan expected to maintain strong growth [2] - Adjustments to net profit expectations for 2025/26 have been made due to potential new product marketing investments and changes in dividend withholding tax rates [2] Group 3: SF Express (9699 HK) - The company is experiencing continuous profit release under diversified layouts, with a buy rating maintained [3] - Revenue growth for 2025-27 has been revised upward by 14%/12%/12% to 22 billion - 30.4 billion yuan, with year-on-year growth rates of 40%/20%/15% [3] - Profit forecasts for 2025-27 have been increased by 26%/23%/27% to 340 million - 760 million yuan, with Non-IFRS net profit margins of 1.5%/2%/2.6% [3] Group 4: Future Outlook for SF Express - SF Express is expected to benefit from a rational return of subsidies in the takeaway market, with significant business space remaining [4] - The target price has been adjusted to 15.4 HKD based on a rolling valuation to 2026, corresponding to 0.5 times the sales ratio [4] Group 5: Consumer Industry Overview - The consumer market in mainland China showed moderate recovery in the first half of 2025, with structural differentiation in performance across segments [8] - Key trends include the leading performance of experiential consumption, revenue growth from global expansion strategies, and operational efficiency becoming a critical factor for profit differentiation [8][9] - Recommendations include focusing on players capturing consumer trends with high growth potential, such as Pop Mart (9992 HK), and industry leaders with stable fundamentals like Midea (000333 CH), Anta (2020 HK), and Yili (600887 CH) [8] Group 6: Automotive Industry Overview - The penetration rate of new energy vehicles reached 55.2% in August, with retail sales of passenger cars hitting a historical high of 1.995 million units [12] - The export of passenger cars, including new energy vehicles, maintained good growth momentum, with 204,000 new energy vehicles exported in August, accounting for 40.9% of total exports [13] - The upcoming launch of multiple new models in Q3-Q4 2025 is expected to enrich market supply and boost sales during the traditional peak season [13][14]

Core Viewpoint - Goldman Sachs maintains a buy rating for Tencent, highlighting the company's significant cost advantages in AI infrastructure and projecting revenue and earnings growth through 2025 [2][3]. Group 1: AI Infrastructure and Cost Efficiency - Tencent demonstrates significant cost advantages in AI infrastructure by utilizing dynamic model routing to lower inference costs, transitioning from deep inference models to Turbo and refined models [5]. - The majority of queries in Tencent's search business are now processed through the Turbo model, which can also operate on the more cost-effective refined model [5]. - Management expresses confidence in chip supply, stating that internal demand for computing power is sufficient and that the company can utilize domestic chips for inference [6][7]. Group 2: Mixed-Mode Model Development - Tencent's self-developed mixed-mode 3D model ranks highly on the Hugging Face platform, focusing on training from text-based models to multi-modal and physical world applications [9]. - AI technology has improved efficiency in key areas, such as increasing click-through rates in advertising and accelerating content generation in game development [10]. Group 3: Integration of AI into WeChat Ecosystem - The company plans to cautiously integrate AI into the WeChat ecosystem, prioritizing user experience and security, reflecting Tencent's commitment to the stability of its super app ecosystem [11]. Group 4: AI-Driven Content Production in Gaming - AI has significantly enhanced content production efficiency in game development, with automated code generation speeding up prototype development while still requiring manual debugging [12]. - The domestic gaming market has a substantial user base, with potential to convert mini-game users into application game users [12]. - Tencent aims to leverage its strong PC platform fan base and dedicated mobile esports events to extend the lifecycle of games like "Valorant" [12]. Group 5: Advertising Growth through AI Upgrades - Tencent has upgraded its advertising base model to improve conversion rates, focusing on content consumption and commercial behavior analysis [16]. - AI-driven advertising technology upgrades are expected to enhance click-through rates across Tencent's ad inventory, offsetting depreciation impacts related to AI [17]. - The company anticipates that AI will create monetizable intent recommendation and agent prompt features in the long term [18]. Group 6: Cloud Business and Revenue Growth - Tencent is shifting towards value-added software and inference efficiency in its cloud business, with healthy profit margins in the domestic market [19]. - The unique WeChat ecosystem and global gaming assets, combined with multiple monetization levers, position Tencent for compound revenue growth amid macroeconomic cycles [20].

Investment Rating - The investment rating for Tencent Holdings is "Outperform the Market" [4][34]. Core Insights - Tencent's revenue grew by 15% year-on-year, with adjusted profit increasing by 10%. In Q2 2025, Tencent achieved revenue of 184.5 billion yuan, a year-on-year increase of 14.5%, primarily driven by advertising and gaming businesses. The adjusted operating profit for Q2 2025 was 69.2 billion yuan, up 18% year-on-year [1][10]. - The company is optimistic about the integration of AI applications within its ecosystem, enhancing user experience and driving growth in social e-commerce [2][19]. - The gaming segment saw a 22% year-on-year increase in revenue, with domestic game revenue rising by 17% to 40.4 billion yuan, supported by strong contributions from self-developed games [3][22][26]. - Advertising revenue reached 35.8 billion yuan, reflecting a 20% year-on-year growth, attributed to higher click-through rates from AI deployment and improved transaction activities [4][31]. - Financial technology and enterprise services returned to double-digit growth, with revenue increasing by 10% to 55.5 billion yuan, driven by commercial payment services and consumer credit services [4][32]. Summary by Sections Financial Performance - In Q2 2025, Tencent's total revenue was 184.5 billion yuan, a 14.5% increase year-on-year, with adjusted operating profit at 69.2 billion yuan, up 18% year-on-year. The non-IFRS net profit was 63 billion yuan, reflecting a 10% increase [1][10][11]. - The overall gross margin improved to 57%, up 4 percentage points year-on-year, with specific segments like value-added services and financial technology showing significant margin improvements [11][34]. Gaming Business - The gaming revenue for Q2 2025 was 59.2 billion yuan, a 22% increase year-on-year. Domestic market revenue rose by 17% to 40.4 billion yuan, driven by popular titles like "Delta Action" and "Honor of Kings" [3][22][26]. - International gaming revenue grew by 35% to 18.8 billion yuan, with strong performances from titles like "VALORANT" and "PUBG MOBILE" [3][22][27]. Advertising and Marketing Services - The advertising revenue for Q2 2025 was 35.8 billion yuan, a 20% increase year-on-year, primarily due to enhanced click rates from AI and improved transaction activities through WeChat [4][31]. - The company noted that the current loading rate for video accounts is relatively low, indicating potential for future growth in advertising monetization [31]. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue grew by 10% to 55.5 billion yuan, with a notable recovery in growth rates. The cloud service revenue is estimated to have increased by 17% in Q2 2025 [4][32][34].

Group 1 - The 22nd China International Digital Interactive Entertainment Expo (ChinaJoy) officially opened on August 1 in Shanghai, with Tencent Games showcasing 17 products, occupying nearly half of the N4 hall [1] - Tencent Games' theme for this year's event is "COOL Goose Summer Camp," which aims to enhance product experience and booth services, featuring over ten gameplay categories and popular new releases such as "Runeterra: League of Legends Card Battle" and "Dance Dance Revolution: Party" [1] - The event includes immersive trial experiences and interactive activities like esports competitions and challenge games, providing a comprehensive exhibition service for attendees [1] Group 2 - The "COOL Goose Summer Camp" consists of a central square, a comprehensive exhibition area, and three independent exhibition zones, highlighted by a 40-meter "Goose MAX" screen that connects various experiences [2] - Attendees can engage in "cyber interaction" by projecting hand-drawn images and real-time comments onto the "Goose MAX" screen, with live leaderboards for competitive events displayed [2] - The central square features a green camp design with multiple interactive areas, allowing players to participate in fun activities and earn rewards, such as reciting a poem to use a loudspeaker or generating AI-customized memorabilia [2] Group 3 - The central square is flanked by a comprehensive exhibition area and three independent booths, showcasing 17 game products with diverse interactive experiences [3] - The comprehensive exhibition area features 11 products, including popular titles like "Honor of Kings" and games from Supercell, covering various genres such as strategy and simulation [3] - Independent booths include major titles from the Dungeon Fighter IP and new releases like "Valorant" and "Runeterra," offering extensive trial activities and a unique exhibition experience for players [3]

Core Insights - Supercell's game "Clash Royale" has seen a significant resurgence in revenue, reaching $27.7 million in May 2023, a 46% year-over-year increase, and hitting a new monthly high of $37 million in June 2023 [3][5] - The game's daily active users (DAU) have surged, placing it among the top three globally, surpassing other Supercell titles like "Clash of Clans" and "Brawl Stars" [5][6] - Supercell's recent success is attributed to a shift in operational strategy, focusing on player experience and innovative gameplay, rather than solely relying on new game releases [6][19] Revenue Growth - "Clash Royale" achieved a monthly revenue of $27.7 million in May 2023, marking a 46% increase compared to the previous year [3] - In June 2023, the game's revenue further increased to $37 million, indicating a strong upward trend [3] - The game set a new daily revenue record of $3.8 million on July 8, 2023, following the introduction of a new game mode [5] Operational Strategy - Supercell has implemented significant changes in "Clash Royale," including removing barriers to player rewards and enhancing gameplay experiences [9][10] - The company has expanded its operational teams to focus on long-term game development and user retention, moving away from its traditional small team model [18][19] - Supercell's collaboration with popular streamers has also contributed to the game's renewed popularity, with notable streamers driving engagement and player interest [14][15] Market Position - Supercell's revenue has faced challenges, with a reported decline of over 4% year-over-year in 2023, prompting the need for strategic changes [18] - The company has restructured its management approach, dividing teams into those focused on new game development and those dedicated to enhancing existing titles [18][19] - The shift in strategy has resulted in a notable increase in user engagement and revenue for older titles, indicating a successful adaptation to market demands [19][23]