Core Viewpoint - Tencent's Q2 2025 financial results exceeded expectations, with revenue of 184.5 billion yuan, a 15% year-on-year increase, and adjusted net profit of 63.1 billion yuan, a 10% increase, surpassing Bloomberg consensus estimates [1] Group 1: Gaming Performance - International and domestic gaming revenues grew by 35% and 17% respectively in Q2 2025, with domestic gaming revenue remaining above 40 billion yuan [1] - The company's evergreen gaming strategy continues to perform well, with titles like "Honor of Kings" and "Peacekeeper Elite" showing strong growth [1] - New game "Delta" has seen significant user growth, with daily active users increasing from 12 million to over 20 million from April to July [1] Group 2: Advertising Revenue - Tencent's advertising revenue increased by 20% year-on-year to 35.8 billion yuan in Q2 2025, driven by significant growth in video accounts, mini-programs, and search ads [2] - The growth in advertising was primarily fueled by eCPM increases and improved click-through rates due to AI enhancements [2] Group 3: Financial Technology and Enterprise Services - Financial technology and enterprise services revenue grew by 10% year-on-year to 55.5 billion yuan, marking a return to double-digit growth [2] - The growth was supported by improvements in payment transactions and consumer loan services, alongside strong demand for AI-related services [2] Group 4: Capital Expenditure and Share Buybacks - Capital expenditure for Q2 2025 was 19.1 billion yuan, accounting for 10.4% of revenue, with the company planning to maintain a low-teens percentage for the year [2] - The company has repurchased 40 billion Hong Kong dollars worth of shares year-to-date, with a commitment to repurchase at least 80 billion Hong Kong dollars in 2025 [2] Group 5: Future Outlook - The company has raised its adjusted net profit forecasts for 2025-2027, now projecting 255.6 billion, 298.0 billion, and 336.8 billion yuan respectively [3] - The target price based on SOTP valuation method is set at 711 Hong Kong dollars, indicating a potential upside of 20.6% [3]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 711 HKD, indicating an upside potential of 20.6% [6][8]. Core Insights - The company reported a strong Q2 2025 performance, with revenue reaching 184.5 billion HKD, a year-on-year increase of 15%, surpassing Bloomberg consensus estimates by 3% [6]. - Adjusted net profit for Q2 2025 was 63.1 billion HKD, reflecting a 10% year-on-year growth, also exceeding expectations [6]. - The gaming segment showed robust growth, particularly in international markets, with game revenues increasing by 35% year-on-year [6]. - Advertising revenue grew by 20% year-on-year, driven by AI enhancements that improved targeting and click-through rates [6]. - Financial technology and enterprise services revenue increased by 10% year-on-year, marking a return to double-digit growth [6]. Financial Data and Profit Forecast - Revenue projections for the company are as follows: - 2023: 609 billion HKD - 2024: 660.3 billion HKD - 2025E: 746.4 billion HKD - 2026E: 828 billion HKD - 2027E: 904.5 billion HKD - Adjusted net profit forecasts are: - 2023: 157.7 billion HKD - 2024: 222.7 billion HKD - 2025E: 255.6 billion HKD - 2026E: 298 billion HKD - 2027E: 336.8 billion HKD - Earnings per share (EPS) estimates are: - 2023: 16.68 HKD - 2024: 24.03 HKD - 2025E: 27.87 HKD - 2026E: 32.49 HKD - 2027E: 36.73 HKD [3][9]. Market Data - The closing price of the company's stock is 590 HKD, with a market capitalization of approximately 541.07 billion HKD [4]. - The stock has a 52-week high of 600 HKD and a low of 364.2 HKD [4].