December 15, 2025 03:39 AM GMT Tencent Holdings Ltd. | Asia Pacific Business Sharing Takeaways We attended Tencent's business sharing in Bangkok where management outlines its strategies on international cloud and games. While Tencent's overseas games have started to bear fruit this year, we believe its international cloud opportunities are underappreciated by the market. OW and Top Pick. Tencent Cloud International: Tencent Games (Overseas Games / Shooting Games Genre): | M | | | | --- | --- | --- | | | | I ...

15 December 2025 | 7:34AM HKT Equity Research Tencent Holdings (0700.HK): Business Sharing Highlights: Long runway for int'l cloud & overseas games growth empowered by AI; Buy We attended Tencent's Business Sharing event, held alongside the PUBG MOBILE eSports Grand Finals, in Thailand on Dec 14 hosted by Tencent's Chief Strategy Officer, Vice President of Tencent Cloud International, Head of LightSpeed Studios (Quantum Studio & Anyplay Studio) and other Games business heads. Key focus areas/topics and take ...

Core Insights - Tencent Cloud has expanded its strategic partnership with Ryde Group Ltd to enhance the tourism and mobility experience for Chinese visitors in Singapore [1] - The new phase includes the launch of the Weixin Mini Program in Singapore, building on previous integrations of Tencent Cloud's Real-Time Communication technology within the Ryde platform [1] Company Developments - The partnership aims to leverage Tencent's technology to improve in-app communications and overall user experience on the Ryde platform [1] - The introduction of the Weixin Mini Program is expected to facilitate better connectivity and services for Chinese tourists, aligning with Singapore's tourism strategies [1] Industry Impact - This collaboration highlights the growing trend of integrating technology solutions to enhance mobility services in urban environments [1] - The initiative reflects the increasing importance of catering to the needs of international visitors, particularly from China, in the competitive tourism market of Singapore [1]

Summary of Tencent Holdings (0700.HK) 3Q25 Conference Call Company Overview - **Company**: Tencent Holdings (0700.HK) - **Market Cap**: HK$6.4 trillion / $818.5 billion - **Target Price**: HK$770.00 - **Current Price**: HK$656.00 - **Upside Potential**: 17.4% [1][2] Key Financial Highlights - **3Q25 Revenue Growth**: +15% YoY, the fastest growth in four years, accelerating from 2Q25 [1] - **Adjusted Operating Profit Growth**: +18% YoY [1] - **Revenue Estimates for 2025-27**: Increased by 0-1% due to improved growth durability across games, marketing services, and fintech/business services [2] - **Net Profit Estimates**: Adjusted by -1% to 0% for 2025-27, reflecting higher expenses from AI-related initiatives [2] Core Business Insights AI-Driven Growth - **AI Impact**: AI continues to empower growth across all business segments, although capex investments for 2025E are lower than expected [3] - **AI Capex**: Revised down to Rmb80 billion for 2025E and Rmb100 billion for 2026E [3] - **AI Applications**: Enhanced functionalities in WeChat, including the "@Yuanbao" feature for content summarization [20] Gaming Sector - **Game Revenue Growth**: Sustained above 20% YoY growth for three consecutive quarters, with expectations of 18% and 11% growth for 4Q25E and FY26E respectively [21] - **Key Titles**: "Honour of Kings" and "Delta Force" showing strong performance, with DAU reaching 139 million for "Honour of Kings" [21] - **WeChat Mini-Games**: Surpassed 1 billion users, with significant growth in gross receipts [21][23] Marketing Services - **Marketing Revenue Growth**: Estimated at 18% for 4Q25E and FY26E, driven by increased user engagement and AI-driven adtech [24] - **Ad Load and eCPM**: Increased ad load and higher effective cost per mille (eCPM) contributing to revenue growth [24] Fintech and Business Services - **Revenue Growth**: Expected at 12% and 10% for 4Q25E and FY26E, driven by consumer loan services and commercial payment volume [25] - **Cloud Services**: Slower growth anticipated due to supply chain constraints on GPU sourcing [25] Investment Outlook - **Operating Profit Margins**: Expected to expand by 121bps and 119bps for FY25E and FY26E, respectively, despite higher operational expenses [26] - **AI as a Growth Driver**: Continued investment in AI expected to narrow the gap between revenue and profit growth [26] - **Overall Positioning**: Tencent is viewed as one of the best-positioned companies in the China internet sector to benefit from AI applications [1][2] Risks - **Industry Competition**: Increased competition in performance-based advertising [29] - **Game Launch Delays**: Potential delays in game launches and approvals [29] - **Fintech and Cloud Growth**: Slower-than-expected growth in these sectors [29] Conclusion - Tencent Holdings demonstrates strong financial performance with significant growth across its gaming, marketing, and fintech sectors, driven by AI applications. The company is well-positioned for future growth, although it faces risks from competition and operational challenges.

Summary of Tencent Holdings (0700.HK) 3Q25 Earnings Call Company Overview - **Company**: Tencent Holdings - **Ticker**: 0700.HK - **Quarter**: 3Q25 Key Highlights 1. **Revenue Growth**: Tencent reported a revenue increase of 15% year-over-year (yoy) to Rmb192.869 billion, exceeding expectations by 2% [15][24] 2. **Gaming Performance**: Online games revenue grew by 23% yoy to Rmb63.6 billion, driven by strong domestic and international game performance [15][21] 3. **Advertising Revenue**: Advertising revenue increased by 21% yoy to Rmb36.242 billion, supported by AI-driven marketing services [15][16] 4. **FinTech and Business Services**: Revenue from FinTech and Business Services grew by 10% yoy to Rmb58.174 billion, with healthy growth in consumer loan services and commercial payment activities [19][21] 5. **Operating Profit**: Adjusted operating profit rose by 18% yoy to Rmb72.570 billion, with a gross margin of 56.4%, reflecting a 3.3 percentage point increase yoy [15][19] 6. **Earnings Per Share (EPS)**: Non-IFRS EPS was Rmb7.58, up 19% yoy, surpassing consensus estimates by 6% [15][19] AI and Cloud Initiatives 1. **AI-Driven Growth**: AI initiatives are driving revenue growth, particularly in marketing services, which saw a 21% increase [2][10] 2. **Capex Outlook**: Capital expenditure decreased to Rmb13 billion in 3Q25 from Rmb19 billion in 2Q25, primarily due to foreign chip supply constraints [2][19] 3. **AI Model Development**: Tencent's AI Lab introduced a new Continuous Autoregressive Language Model (CALM), which reduces training and inference compute requirements [10][11] Strategic Focus Areas 1. **Gaming Strategy**: Continued focus on domestic and international gaming strategies, with upcoming launches expected to sustain revenue growth [13][14] 2. **Advertising Technology**: Progress in AI-driven ad tech upgrades and the performance of the new AIM+ automated ad campaign solution [12][14] 3. **Talent Retention**: Emphasis on retaining top talent in AI development to enhance competitive positioning [10][11] Financial Metrics 1. **Deferred Revenue**: Deferred revenue growth slowed to 11% yoy, down from 12% in the previous quarter [2][19] 2. **Free Cash Flow**: Free cash flow increased to Rmb58.5 billion in 3Q25, compared to Rmb43.0 billion in 2Q25 [21] 3. **Net Cash Position**: Net cash reached Rmb102.4 billion by the end of 3Q25, up from Rmb74.6 billion in 2Q25 [21] Risks and Challenges 1. **Industry Competition**: Increased competition in performance-based advertising could impact revenue growth [14][23] 2. **Game Launch Delays**: Potential delays in game launches and regulatory approvals may affect future performance [14][23] 3. **Reinvestment Risks**: Risks associated with reinvestment in AI and cloud initiatives could impact profitability [14][23] Conclusion - Tencent's strong performance in 3Q25, driven by AI and gaming, positions the company favorably for future growth. However, challenges such as competition and regulatory hurdles remain critical considerations for investors [14][23]. The company maintains a Buy rating with a 12-month target price of HK$770, reflecting a potential upside of 17.2% from the current price of HK$657 [24][23].

Summary of Key Points from the Conference Call Industry Overview - The focus is on the China internet sector, particularly mega-cap companies such as Tencent, Alibaba, JD, Meituan, and PDD, as they prepare for their 3Q earnings reports [1][2]. Core Insights and Arguments - **Mixed Earnings Expectations**: Anticipated mixed results for mega-caps in 3Q, with a projected decline in aggregate profits by -31% year-over-year (yoy) for the September quarter, compared to -9% yoy in the June quarter [2]. - **AI and Cloud Revenue Growth**: Expected uplift in capital expenditures (capex) related to AI from Alibaba and Tencent, alongside further acceleration in cloud revenue, driven by strong demand for AI tokens [1][2]. - **Quick Commerce Losses**: Significant losses in quick commerce are expected to continue, with Alibaba, Meituan, and JD projected to incur losses of Rmb-36 billion, Rmb-20 billion, and Rmb-13 billion respectively, widening from previous quarters [2]. - **Investment in New Business Areas**: Mega-caps are expected to invest in new business areas, including AI and international markets, which may impact group margins in the near term [1][2]. - **Consumer-Facing AI Initiatives**: Increased focus on consumer-facing AI initiatives, which may dilute margins in the short term but are seen as essential for long-term growth [1][2]. Company-Specific Insights - **Tencent**: Expected to report solid results with revenue growth of +13% yoy and adjusted EBIT growth of +20% yoy to Rmb73.2 billion. Concerns exist regarding potential margin suppression due to increased AI investments [11][19]. - **Alibaba**: Projected revenue growth of +1% yoy with a significant drop in adjusted EBITA by -80% yoy to Rmb8.2 billion, largely due to investments in quick commerce [11][20]. - **PDD**: Anticipated revenue growth of +16% yoy, with adjusted EBIT declining by -18% yoy to Rmb22.0 billion, driven by steady domestic growth and recovery in Temu's US GMV [11][21]. - **Meituan**: Expected to face a -252% yoy decline in adjusted EBIT, with increased competitive intensity impacting local commerce [11][18]. - **JD**: Projected revenue growth of +11% yoy, but with adjusted EBIT declining by -93% yoy to Rmb0.4 billion, focusing on investment priorities [11][18]. Other Important Insights - **Market Sentiment**: Recent sector pullback attributed to profit-taking on AI themes and concerns over weak profits in 3Q, with upcoming results seen as a potential inflection point for future earnings [2]. - **Valuation Comparisons**: Tencent and Alibaba are viewed as having undemanding valuations compared to global peers, with expectations of continued growth in AI applications and cloud capabilities [10][20]. - **Long-Term Outlook**: Despite short-term losses in quick commerce, there is optimism regarding narrowing losses and improving unit economics in international business segments by 2026 [2][10]. This summary encapsulates the key points discussed in the conference call, highlighting the current state and future outlook of the China internet sector and its major players.

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China Internet Equities** sector, particularly the performance and outlook of major companies within this industry, including **Tencent**, **Alibaba**, **NetEase**, and **Kuaishou** [1][2]. Core Insights and Arguments 1. **Valuation Trends**: - The China internet sector has seen a **38% increase year-to-date (YTD)**, with the one-year forward PE multiple expanding from **14x to 21x**. However, large-cap China internet stocks are trading at **16x**, which is below the **10-year average of 20x**, indicating that valuations are not yet demanding [2][21]. 2. **Growth Areas**: - **AI and Gaming** are highlighted as key growth areas. The demand for AI, particularly in robust inferencing and post-training, is expected to sustain growth. Companies like Tencent and NetEase are well-positioned to benefit from this trend, with Tencent's gaming titles expected to drive growth in 4Q25 and 2026 [3][4]. 3. **Stock Picking Framework**: - The analysis suggests that **Tencent** and **Alibaba** are best positioned to benefit from AI-related growth. Both companies are expected to see earnings upside from a recovery in their associates and joint ventures. The top picks in gaming are **Tencent** and **NetEase**, with potential margin surprises from legacy games [4][19]. 4. **Risks Identified**: - **Geopolitical uncertainty**: Potential chip export restrictions from the US could impact supply chains. - **Competition**: The ongoing price war in quick commerce may lead to deeper losses, with new entrants like PDD and Douyin intensifying competition. - **Market Corrections**: The sector's forward PE of **21x** may make it vulnerable to corrections during risk-off events [5][19]. Additional Important Insights 1. **AI as a Growth Driver**: - AI is expected to be a significant driver for further re-rating in the sector. Companies like **Alibaba** and **Baidu** are leveraging advancements in self-developed chips and cloud revenue acceleration to capture AI demand [23][31]. 2. **Cloud Market Dynamics**: - **AliCloud** is positioned to gain market share, with plans for global expansion and a strong focus on AI capabilities. Tencent's international cloud revenue has also seen high double-digit growth year-over-year [25][31]. 3. **Valuation and Earnings Estimates**: - The report provides a detailed valuation snapshot, indicating that companies like **NetEase** and **Tencent** have favorable PEG ratios, trading at or below **1x PEG**. The analysis suggests that **Pinduoduo** (PDD) has emerged as a value opportunity trading at **10x 2026 PE** [4][11]. 4. **Sum-of-the-Parts Valuation**: - The sum-of-the-parts analysis for **Alibaba** and **Tencent** indicates potential upside of **20%** and **21%**, respectively, based on their core business valuations and strategic investments [36][37]. 5. **Market Sentiment**: - The sentiment in the market remains cautiously optimistic, with large caps like **Tencent**, **Alibaba**, **NetEase**, and **Kuaishou** rated as "Buy" due to their strong fundamentals and growth prospects [9][10]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the China internet sector.

Summary of Tencent Holdings (0700.HK) Conference Call Company Overview - **Company**: Tencent Holdings (0700.HK) - **Market Cap**: HK$6.3 trillion / $811.6 billion - **Enterprise Value**: HK$6.4 trillion / $821.4 billion - **Current Price**: HK$651.50 - **Target Price**: HK$770.00 - **YTD Share Price Performance**: +56% vs. HSTECH +44% [1][6] Key Industry Insights - **AI Developments**: Tencent is making significant advancements in AI, particularly with its Hunyuan Image 3.0 model, which recently ranked No. 1 in text-to-image models on LMArena [1][22][46]. - **Cloud Market Position**: Tencent holds a 7% market share in China's AI cloud enterprise market, with expectations for growth driven by increased capex and AI demand [47]. Financial Performance and Projections - **Revenue Growth**: Projected revenue growth for FY25 is +13% YoY, with total revenue estimates of Rmb748.49 billion [1][18]. - **EPS Growth**: Expected EPS growth of +18% YoY for FY25, with estimates of Rmb27.72 [1][18]. - **Capex Increase**: FY25-27E capex revised to Rmb350 billion from Rmb300 billion, reflecting increased investment in AI and cloud capabilities [1][20][26]. Core Business Segments Gaming - **Revenue Growth**: Anticipated game revenue growth of 16% YoY for 3Q25E, driven by strong performance from Delta Force and other evergreen games [27][28]. - **Pipeline Visibility**: Upcoming game launches expected to sustain growth momentum [27]. Advertising - **Marketing Services Growth**: Estimated marketing services revenue growth of 19% for both 3Q25E and FY25E, supported by AI-driven adtech improvements [28]. - **New Ad Inventory**: Introduction of new ad products within Weixin expected to enhance revenue [22][28]. Fintech and Cloud - **Fintech Revenue**: Expected growth of 11% YoY for 3Q25E, with stabilization in transaction values [28]. - **Cloud Revenue Growth**: Revised cloud revenue growth forecasts to 11%/25%/20% for FY25/26/27E, reflecting higher capex and AI demand [20][28]. Risks and Challenges - **Geopolitical Risks**: Ongoing concerns regarding US tariffs and geopolitical tensions impacting investor sentiment [1]. - **Competition**: Increased competition in performance-based advertising and potential delays in game launches could pose risks [28]. Conclusion - **Investment Rating**: The company maintains a "Buy" rating with a target price increase to HK$770, reflecting confidence in its AI capabilities and growth potential across its business segments [1][30].

Summary of Tencent Holdings (0700.HK) Digital Ecosystem Summit Company Overview - **Company**: Tencent Holdings (0700.HK) - **Event**: 2025 Tencent Global Digital Ecosystem Summit - **Date**: September 16-17, 2025 Key Industry Insights 1. **Growth Engines**: Tencent Cloud and ecosystem partners focus on efficiency through intelligence and globalization as primary growth drivers [1] 2. **AI Development**: Over 30 Hunyuan models released in the past year, including Hunyuan3D for high-resolution 3D asset creation [1] 3. **AI as Growth Multiplier**: Significant improvements noted in various sectors: - Gaming: Virtual teammates - Marketing: Click-through rate (CTR) improvements - Internal Productivity: AI sales representatives achieving 3X efficiency, coding efficiency up by 34% with 10% less time [1] 4. **Overseas Expansion**: High double-digit revenue CAGR from international markets over the past three years, with 90% of Internet customers selecting Tencent Cloud as their partner [1] 5. **Agent Infrastructure**: Introduction of Tencent Cloud agent development platform (ADP 3.0) for building secure applications [1] 6. **Chip Compatibility**: Expanded support for a variety of domestic chips for AI workloads [1] 7. **AI Adoption in China**: Daily token consumption reached over 3 trillion as of June 2025, a 300-fold increase from early 2024 [1] Financial Performance 1. **Revenue Growth**: Projected total revenues for 2025 estimated at RMB 820.27 billion, with a consistent growth trajectory across various segments [15] 2. **Profit Margins**: Gross margin expected to improve to 56.1% by 2025, with operating margins also on an upward trend [15] 3. **Market Position**: Tencent is trading at a P/E of 19x for 2026E, significantly lower than global peers like META (26x) and GOOGL (24x) [6] Strategic Developments 1. **Foundation Models**: Multiple new models launched, including Hunyuan World-Voyager and Hunyuan Image 2.1, enhancing capabilities in 3D world generation and text-to-image generation [2][6] 2. **SaaS Growth**: Number of SaaS customers increased by 60% year-over-year [13] 3. **International Data Centers**: Plans to establish new data centers in Saudi Arabia and Japan, expanding global infrastructure [14] Risks and Challenges 1. **Industry Competition**: Increased competition in performance-based advertising and potential delays in game launches [7] 2. **Growth Expectations**: Slower-than-expected growth in FinTech and Cloud businesses could pose risks [7] Conclusion - **Investment Rating**: Goldman Sachs maintains a "Buy" rating on Tencent with a 12-month target price of HK$701, indicating an upside potential of 8.7% from the current price of HK$645 [6] - **Market Cap**: Approximately HK$6.3 trillion / $803.7 billion [15] This summary encapsulates the key points from the Tencent Holdings Digital Ecosystem Summit, highlighting the company's strategic focus on AI, international expansion, and financial performance while acknowledging potential risks in a competitive landscape.

Market Position - Alibaba Group Holding captured over 35.8% of China's artificial intelligence cloud services market in the first half of the year, surpassing its three closest rivals combined [1][2] - ByteDance's Volcano Engine ranked second with a 14.8% market share, followed by Huawei Cloud at 13.1%, Tencent Cloud at 7%, and Baidu Cloud at 6.1% [2] Market Growth Forecast - The Chinese market for AI cloud services is expected to more than double by 2025, reaching 51.8 billion yuan (approximately US$7.3 billion), up from 20.83 billion yuan in 2024 [3] - From 2025 to 2030, the sector is projected to grow at an annual rate of 26.8% [3] Company Investments and Developments - Alibaba is heavily investing in AI and cloud infrastructure, focusing on "full-stack AI capabilities," including the Qwen family of large language models and various cloud services [5][6] - The company reported a revenue of 33.4 billion yuan for the June quarter, marking a 26% increase year-over-year, making Alibaba Cloud the fastest-growing unit within the group [7] - Capital investment in AI and cloud infrastructure reached 38.6 billion yuan in the three months to June, totaling over 100 billion yuan across the past four quarters [8]