Investment Rating - The industry investment rating is "Positive" (maintained) [7] Core Insights - The gaming sector has shown resilience in the current macroeconomic environment, with strong performance from both listed and non-listed companies during the Spring Festival period, confirming the ongoing logic of a significant product year in 2026 [7] - Notable games such as "Goose Goose Duck" have dominated the App Store charts, while companies like Century Huatong and Perfect World have seen impressive pre-registration numbers and revenue growth for their upcoming titles [2][3][5] - The overall industry sentiment is improving, with non-listed companies also achieving remarkable results, as seen with "Blue Archive" and "Arknights" celebrating significant anniversaries and experiencing substantial revenue increases [4] Summary by Sections Company Performance - Tencent's games have shown comprehensive growth, with "Goose Goose Duck" topping charts and "Dark Zone Breakthrough" reaching over 230 million registered users [7] - Century Huatong's "Yihuan" has surpassed 25 million pre-registrations, outperforming titles like "Genshin Impact" in pre-launch interest [3] - Giant Network's "Supernatural Action Group" has achieved a daily active user (DAU) count exceeding 10 million, benefiting from the holiday season [3] Revenue Growth - Tencent's "Honor of Kings" saw a 105% month-on-month revenue increase to $220 million, while "Peacekeeper Elite" surpassed $110 million in revenue during January [7] - Non-listed games like "Blue Archive" and "Arknights" reported global revenue increases of 220% and 122%, respectively, in January [4] Investment Recommendations - The report recommends focusing on Perfect World due to the strong pre-registration numbers for "Yihuan" and suggests monitoring companies like Tencent, Huya, Century Huatong, Giant Network, and Kingsoft for their product lines [5]

Core Insights - The report indicates that in January 2026, China's domestic game market achieved actual sales revenue of 32.468 billion yuan, with a month-on-month growth of 2.99% and a year-on-year growth of 4.47%, signaling new trends in the gaming industry for the year [1] Client Game Market Performance - In January, the client game market in China generated actual sales revenue of 8.236 billion yuan, reflecting a month-on-month increase of 7.77% and a year-on-year surge of 23.46%, significantly outperforming the overall market growth of 4.47% [2] - The growth is attributed to new product launches, such as "Arknights: End of the World" and "Crossfire: Future," which contributed over 500 million yuan in revenue each within the month [2] - The data suggests a shift in the client market from being a supplementary channel to becoming a primary battleground, as high-configuration games provide experiences that mobile platforms cannot replicate [2] Mobile Game Market Trends - The mobile game market in January recorded actual sales revenue of 22.621 billion yuan, with a month-on-month increase of 1.8% but a year-on-year decline of 1.52% [3] - The month-on-month growth was driven by new and existing products, with "Honor of Kings" returning to the top of the global mobile revenue chart [3] - The year-on-year decline is attributed to the high base from January 2025, which coincided with the Spring Festival, while deeper structural issues in the mobile market are highlighted by the rise of social party games like "Duck Duck Goose" [3] Overseas Market Performance - In January, China's self-developed games achieved actual sales revenue of 2.077 billion USD in overseas markets, showing a slight month-on-month decrease of 2.50% but a year-on-year increase of 24.05% [4] - The growth is driven by mature products like "Genshin Impact" and new releases such as "Arknights: End of the World," which generated over 20 million USD in just three days [4] - The report emphasizes a shift from a "single product" approach to a "matrix strategy," allowing companies to leverage the same IP across multiple markets and platforms simultaneously [4] Industry Trends - The report reflects three emerging trends in the gaming industry: 1. Multi-platform integration is becoming the new norm, as evidenced by the significant PC revenue share of "Arknights: End of the World," indicating a blurring of lines between mobile and PC gaming [5] 2. In a competitive landscape, game companies are focusing on operational precision, as seen with the success of "Honor of Kings" and "Peacekeeper Elite," which rely on stable updates and engaging content to retain players [5] 3. The overseas market remains promising, with a 24% year-on-year growth indicating that there is still room for expansion, necessitating a global perspective in game design from the outset [6]

Group 1 - The core viewpoint of the report indicates that the Chinese gaming market is showing steady growth, with actual sales revenue reaching 32.468 billion yuan in January 2026, reflecting a month-on-month increase of 2.99% and a year-on-year increase of 4.47% [1][2] - The client game market generated actual sales revenue of 8.236 billion yuan, with a month-on-month growth of 7.77% and a year-on-year growth of 23.46%, driven primarily by the launch of new products [5][10] - The mobile game market achieved actual sales revenue of 22.621 billion yuan, with a month-on-month increase of 1.8% but a year-on-year decrease of 1.52%, indicating a mixed performance influenced by new releases and high competition [10][9] Group 2 - The overseas market for self-developed games saw actual sales revenue of 2.077 billion USD, with a month-on-month decrease of 2.5% but a year-on-year increase of 24.05%, highlighting the dual engine of mature products and new games driving growth [27][30] - The top-performing mobile games in January 2026 included "Peacekeeper Elite" and "Dungeon & Fighter: Origin," which saw significant revenue increases due to new content and updates [14][16] - The new game "Arknights: Endfield" achieved over 500 million yuan in its first month, showcasing the effectiveness of innovative gameplay and strong IP influence in attracting players [24][26]

Core Insights - The Chinese gaming market showed a steady performance in January 2026, with actual sales revenue reaching 32.468 billion yuan, reflecting a month-on-month growth of 2.99% and a year-on-year growth of 4.47%, indicating a continuous positive growth trend [1] - The overseas sales revenue of domestically developed games in January was 2.077 billion USD, marking a significant year-on-year increase of 24.05% [1][12] Market Overview - The overall gaming market in China is stabilizing, supported by both established games and new releases, with a focus on policy adaptation, product iteration, and enhanced user operations [1] - The client game segment emerged as the largest growth highlight, with actual sales revenue of 8.236 billion yuan, showing a month-on-month increase of 7.77% and a year-on-year increase of 23.46% [5] Mobile Gaming Insights - The mobile gaming market experienced a "steady month-on-month increase but year-on-year pressure," with actual sales revenue of 22.621 billion yuan, reflecting a month-on-month growth of 1.8% but a slight year-on-year decline of 1.52% [7] - Major titles like "Honor of Kings" and "Peacekeeper Elite" contributed to revenue growth through content updates and new features, while competition and changing user demands led to declines in some older games [7][8] New Game Performance - New games performed well in January, with "Arknights: Endfield" leading the new game revenue chart with over 500 million yuan, leveraging its classic IP and innovative gameplay [10][12] - "Counter-Strike: Future" also performed strongly, benefiting from its established IP and cross-platform design, topping the iOS free chart on its launch day [12] International Market Dynamics - The overseas market for self-developed games remains a significant growth engine, with January's revenue at 2.077 billion USD, despite a slight month-on-month decline of 2.5% [12] - Successful titles like "Genshin Impact" and "Victory Peak" highlight the global competitiveness and innovation of Chinese games [12][14] Industry Trends - The gaming industry in China is characterized by "internal stability and external growth," with a resurgence in PC games and strong overseas performance injecting new momentum into the sector [16] - Product innovation, IP management, and refined user services are becoming core competitive elements across various segments [16]

Core Insights - The gaming industry is experiencing a shift during the Spring Festival, with a noticeable decrease in the launch of new blockbuster games compared to previous years [1][2][3] - Major companies like Tencent, NetEase, and miHoYo are focusing on retaining existing players rather than aggressively promoting new titles, indicating a strategic pivot towards "user retention" [1][5][27] Group 1: Market Trends - The number of new game launches during the Spring Festival is significantly lower, with established titles like "Sandstone Town Time" and "Little Nightmares" relying on their successful PC versions for traction [2][3] - The cost of acquiring new users has more than doubled compared to previous years, making it less viable to invest in new games during a highly competitive period [5][29] - The focus has shifted from attracting new users to enhancing the experience for existing players, with companies offering substantial in-game benefits and events [5][30] Group 2: Marketing Strategies - Major games are launching significant Spring Festival events to engage existing users, such as "League of Legends Mobile" offering new year benefits and "Honor of Kings" providing free skins and discounts [7][9][11] - Companies are extending their marketing efforts beyond online platforms to include offline activities, creating immersive experiences for players [12][16][18] - The trend of focusing on existing user engagement rather than new user acquisition reflects a more mature approach to sustainable growth in the gaming industry [31][32]

Core Insights - The new game market has shown increased activity in January, particularly in the domestic market with several major releases leading to significant growth compared to previous months [1] - While the number of new games in the overseas market has decreased, top products continue to perform well, indicating a positive start for the new year [1] Domestic Market Summary - In January, seven new games met the statistical standards, showing an increase in quantity and significant growth in individual performance compared to previous months [3] - Notable releases include: - "Tomorrow's Ark: End of the World" by Eagle Horn Network, which achieved over $1.07 million (approximately RMB 7.43 million) in estimated revenue within two weeks of launch [5] - "Counter-Strike: Future" by Tencent, which had over 40 million pre-registrations, indicating strong player anticipation [7] - "Survival for 33 Days" by 37 Interactive Entertainment, which incorporates popular gameplay mechanics to enhance user engagement [11] - "Goose Goose Duck" by Gaggle Studios, which capitalizes on the party game trend during the festive season [13] Overseas Market Summary - In January, 13 new games were released, with a notable increase in revenue performance despite a decrease in the number of new titles [15] - Key overseas releases include: - "Arknights: Endfield" by Eagle Horn Network, which generated over $23.81 million (approximately RMB 165 million) in estimated revenue, topping global new game charts [19] - "RO: World Journey" by Gravity Game Vision, which continues to perform well due to its established IP [19][22] - "Heartopia" by Xindong Network, which successfully leveraged social media for marketing, resulting in strong initial performance [24] - "SEGA Football Club Champions," which aims to attract a broader audience with its simplified gameplay [28] Market Trends - The domestic market is experiencing a revitalization with new releases, while the overseas market shows resilience in revenue despite fewer new entries [1][15] - The competitive landscape remains intense, with established IPs and innovative gameplay mechanics driving player engagement and revenue growth [3][19]

Core Viewpoint - Tencent Holdings is expected to report Q4 2025 earnings with a revenue forecast of 194.6 billion yuan, representing a 13% year-on-year growth, driven by stable performance in online advertising, gaming, and financial technology sectors [1][4]. Group 1: Gaming Sector - The online gaming revenue is projected to reach 58 billion yuan in Q4 2025, reflecting an 18% year-on-year increase, with strong performances from established titles like "Honor of Kings" and "Peacekeeper Elite" [2][5]. - The new game "Delta Action" is expected to perform well, with user acquisition efforts ramping up during the 2026 Spring Festival, potentially boosting revenue further [2][5]. - The overseas gaming market is anticipated to grow by 22% year-on-year, with titles like Supercell's "Clash Royale" and the AAA game "Dying Light: The Following" showing strong performance [2][5]. Group 2: Marketing Services - Marketing services revenue is expected to reach 41.3 billion yuan in Q4 2025, marking an 18% year-on-year growth, supported by stable growth in video accounts and the release of more advertising inventory [2][5]. - AI integration in advertising is projected to mitigate macroeconomic pressures, with significant reductions in operational tasks for advertisers, enhancing overall efficiency [2][5]. Group 3: Financial Technology and Enterprise Services - Financial technology and enterprise services revenue is forecasted to be 61.2 billion yuan, showing a 9% year-on-year increase, primarily driven by payment services [3][6]. - The introduction of AI applications and tools in WeChat mini-programs is expected to provide comprehensive support for developers, facilitating the rapid transformation of ideas into profitable products [3][6]. Group 4: Investment Outlook - The company is increasing investments in AI talent and capabilities, with a long-term growth potential in areas like WeChat e-commerce and AI Agent empowerment not fully reflected in current profit forecasts [3][6]. - Adjusted net profit estimates for 2025-2027 are projected at 260.1 billion, 296.1 billion, and 339.9 billion yuan, with slight downward adjustments of 1%-2% [3][6].

Investment Rating - The report maintains a "Buy" rating for the industry, indicating a positive outlook for the sector's performance relative to the benchmark index [6][34]. Core Insights - The media industry saw a weekly increase of 2.04% from January 12 to January 18, 2026, outperforming major indices. Digital media led the gains with a 10.38% increase, while other segments like publishing and advertising also showed positive growth [2][12]. - Key themes for investment include AI applications and cultural exports, with a focus on sub-sectors such as gaming, intellectual property (IP), short dramas, marketing, and publishing [4][34]. Summary by Sections Market Performance - The media industry outperformed major indices with a 2.04% increase during the week of January 12-18, 2026. Digital media surged by 10.38%, while publishing rose by 3.32%, and advertising marketing increased by 2.58%. The gaming sector saw a modest rise of 1.57%, whereas the film and television broadcasting segments experienced slight declines [2][12]. Industry Key Data AI Applications - Recent downloads for AI applications on iOS were estimated at 27.93K for Deepseek, 208.27K for Doubao, 78.91K for Tencent Yuanbao, and 106.66K for Qianwen, with respective week-on-week changes of -8.79%, -0.67%, -9.86%, and +25.84%. The weekly token call volume on the OpenRouter platform reached 7.65 trillion, marking an 18.97% increase [3][18]. Gaming Data - The top five mobile games on iOS as of January 17, 2026, were "Honor of Kings," "Peacekeeper Elite," "Dungeon & Fighter: Origin," "Three Kingdoms: Strategy Edition," and "Genshin Impact: Moonlight Song." Tencent's "Counterattack: Future" launched and quickly gained over 10 million registered users within three days [3][18][20]. Film Data - The total box office for domestic films during the week was 280 million yuan, with "Hidden Kill" leading at 63.73 million yuan, accounting for 22.7% of the total. Other notable films included "Zootopia 2" and "Avatar 3" [26][27]. Investment Recommendations - The report recommends focusing on AI applications, cultural exports, and specific sub-sectors such as gaming, IP, short dramas, marketing, and publishing. Notable companies to watch include Giant Network, Kying Network, Perfect World, and others [4][34].

Investment Rating - The investment rating for Tencent Holdings is "Outperform the Market" (maintained) [2][8][23] Core Views - Tencent is expected to achieve revenue of CNY 194.6 billion in Q4 2025, representing a year-on-year growth of 13%. The network advertising sector is anticipated to perform steadily, benefiting from the release of advertising inventory and AI integration. The gaming business is expected to show strong performance, particularly with the game "Delta Operation" [4][9] - The company is increasing its investment in AI, which is expected to offset some operational leverage release. The AI investment will primarily manifest in R&D expenses, projected to grow by 28% in Q4 2025 [4][10] - The gaming segment is projected to generate revenue of CNY 58 billion in Q4 2025, with a year-on-year growth of 18%. Domestic game revenue is expected to grow by 16%, supported by established titles like "Honor of Kings" and "Peacekeeper Elite" [5][15][21] - Marketing services revenue is expected to reach CNY 41.3 billion in Q4 2025, reflecting an 18% year-on-year increase, driven by AI enhancements in advertising efficiency [6][19] - Financial technology and enterprise services are projected to grow by 9% year-on-year, with revenue expected to reach CNY 61.2 billion in Q4 2025, primarily driven by payment services [20] Summary by Relevant Sections Financial Performance - Q4 2025 revenue is expected to be CNY 194.6 billion, with a 13% year-on-year increase. Non-IFRS operating profit is projected at CNY 68.1 billion, up 15% year-on-year, and net profit is expected to be CNY 65.2 billion, reflecting an 18% increase [4][10][11] - The expected Non-IFRS net profit margin is 34% for Q4 2025 [10] Gaming Business - The gaming revenue forecast for Q4 2025 is CNY 58 billion, with an 18% year-on-year growth. Domestic game revenue is expected to grow by 16%, while overseas game revenue is projected to increase by 22% [5][21] Marketing Services - Marketing services revenue is anticipated to be CNY 41.3 billion in Q4 2025, marking an 18% year-on-year growth. AI-driven enhancements are expected to improve advertising efficiency significantly [6][19] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services is expected to reach CNY 61.2 billion in Q4 2025, with a 9% year-on-year growth, primarily driven by payment services [20]

Company Overview - Tencent's main businesses in gaming, advertising, finance, and enterprise services are expected to maintain high-quality growth, with AI accelerating talent deployment [1] Gaming Performance - Domestic gaming revenue is projected to grow by 12% year-on-year in Q4, supported by stable performance of established games like "Honor of Kings" and rising revenue from new titles like "Delta Action" [1] - Overseas gaming growth is expected to normalize with a 24% year-on-year increase in Q4, driven by high revenue from Supercell's "Clash Royale" [1] - For 2026, revenue growth is anticipated to be influenced by deferred income from high revenue in 2025 and upcoming titles such as "Honor of Kings World" and "Crossfire: Rainbow" [1] Advertising and Financial Services - Advertising revenue is expected to grow by 19% year-on-year in Q4 2025, with healthy growth anticipated in 2026 due to deeper utilization of ecosystems like video accounts and mini-programs, as well as enhanced user engagement through AI [2] - Financial and enterprise services revenue is projected to grow by 10% year-on-year in Q4 2025, with financial services experiencing a potential slowdown in payment growth due to macroeconomic disturbances [2] - Enterprise services are expected to benefit from revenue growth in video account e-commerce technology services and cloud computing [2] AI Strategy and R&D Investment - Tencent's AI strategy is entering an accelerated phase, with significant R&D investments expected to continue growing [2] - The appointment of former OpenAI researcher Yao Shunyu as Chief AI Scientist and the release of the 2.0 version of the mixed Yuan model in December highlight the company's commitment to AI development [2] Financial Forecast and Valuation - Revenue forecasts for 2025 remain unchanged, while the 2026 revenue forecast has been slightly reduced by 1% to 831.7 billion yuan [2] - Non-IFRS profit estimates for 2025 and 2026 have been increased by 1% to 262.9 billion yuan and 294.8 billion yuan, respectively, with new projections for 2027 set at 903.5 billion yuan in revenue and 326.9 billion yuan in profit [2] Rating and Target Price - The company maintains a "outperform" rating with a target price of 700 HKD, corresponding to 19x/17x 2026e/2027e Non-IFRS P/E, indicating an 11% upside from the current stock price [3]