Tencent Holdings’s Valorant made a strong debut on mobile this week, earning $1 million in gross player spending on iPhones on its first day out in China https://t.co/eypt0YhGwS ...

Summary of Tencent Holdings (700 HK) Conference Call Company Overview - **Company**: Tencent Holdings - **Industry**: Internet Software & Services - **Market Cap**: Approximately USD 683.3 billion Key Points and Arguments Financial Performance - **2Q25 Revenue**: Reported at RMB 184.5 billion, beating consensus expectations by 3% [16] - **Growth Rate**: Year-over-year revenue growth of 15% [16] - **Operating Profit**: Non-IFRS operating profit of RMB 69.2 billion, also beating expectations by 4% [16] - **Net Profit**: Non-IFRS net income of RMB 63.1 billion, exceeding consensus by 3% [16] Segment Performance 1. **Domestic Games (DG)**: - Revenue grew by 17% year-over-year, driven by titles like Delta Force and Honor of Kings [17] - Delta Force's daily active users (DAU) exceeded 20 million in July 2025 [17] 2. **International Games (IG)**: - Revenue surged by 35% year-over-year, driven by Supercell's titles and PUBG Mobile [18] - Clash Royale's gross billings reached a seven-year high in June 2025 [18] 3. **Marketing Services**: - Revenue increased by 20% year-over-year, supported by AI-driven improvements [21] - Video Account, Mini Programs, and Weixin Search ads grew by 50%, 50%, and 60% year-over-year, respectively [21] 4. **Fintech and Business Services (FBS)**: - Revenue grew by 10% year-over-year, driven by consumer loans and commercial payments [22] - Total commercial payment volume resumed year-over-year growth in 2Q25 [22] Growth Projections - **Revenue Estimates**: Increased for 2025-2027, with domestic games up by 2-7%, international games by 3-5%, and ad revenue by 2-6% [1] - **Target Price**: Raised to HKD 690 from HKD 650, implying an upside of approximately 18% [1][4] Operational Efficiency - **Gross Profit Margin (GPM)**: Total GPM improved to 57%, beating expectations by 2 percentage points [16] - **Cost Management**: General and administrative expenses as a percentage of revenue remained flat at 6.3% [25] Shareholder Returns - **Share Buybacks**: Tencent has repurchased HKD 40 billion worth of shares year-to-date, with a commitment of at least HKD 80 billion for 2025 [49][47] - **Dividends**: Planned dividend payments of HKD 41 billion in 2025 [52] Risks and Challenges - **Regulatory Risks**: Potential challenges in obtaining monetization approvals for games and regulatory headwinds in the internet sector [52] - **Market Conditions**: A deeper macroeconomic slowdown could impact advertising budgets [52] Additional Insights - **AI Investments**: Continued benefits from AI investments are expected to drive sustainable growth in advertising and operational efficiency [8] - **Emerging Titles**: Delta Force is on track to become an evergreen title, with the upcoming launch of Valorant Mobile in China being closely watched [8] Conclusion Tencent Holdings demonstrated strong financial performance in 2Q25, with significant growth across its core segments. The company is well-positioned for future growth, supported by strategic investments in AI and a robust pipeline of game titles. However, it faces potential regulatory challenges and macroeconomic risks that could impact its performance. The raised target price reflects confidence in the company's growth trajectory and operational efficiency.

Tencent Holdings Q2 2025 Earnings Call Summary Company Overview - **Company**: Tencent Holdings - **Date**: Q2 2025 Earnings Call Key Financial Metrics - Total revenue increased by 15% year-on-year to **184 billion RMB** [2][3] - Gross profit rose by 22% to **105 billion RMB** [2][3] - Non-IFRS operating profit surged by 80% to **69 billion RMB** [2][3] - Non-IFRS net profit attributable to shareholders grew by 10% to **63 billion RMB** [2][3] - Basic net profit, excluding contributions from associates, increased by 20% [3] Gaming Business Highlights - Domestic gaming revenue grew by 17%, driven by long-standing games like **Dota 2** and **Honor of Kings** [2][5] - International gaming revenue increased by 35% (33% at constant currency), supported by titles from **Supercell**, **PUBG Mobile**, and **Awakening of the Song** [2][5] - **Valorant** achieved record average daily active users in China, with **Valorant Mobile** set to launch soon [5] Social Network and Digital Content Developments - Combined monthly active users of **WeChat** reached **1.4 billion** [2][6] - Mini-programs became a crucial platform connecting users with businesses, with mini-game revenue up by 20% [2][6] - Music streaming service **PNE** solidified its leadership, with subscription revenue up by 17% and total subscribers reaching **124 million** [6] Financial Technology and Commercial Services - Financial technology and commercial services revenue rose by 10% to **56 billion RMB** [4][12] - Growth in financial technology services driven by commercial payment and consumer loan services [4][12] - Cloud services revenue accelerated due to increased demand for AI-related GPU and API token services [4][12] Advertising Revenue Growth - Advertising revenue increased by 20%, attributed to improved click-through rates from AI technology deployment [4][11] - AI-driven advertising strategies enhanced return on investment for advertisers [4][11] AI Technology Integration - AI technology upgraded advertising capabilities, improving click rates and conversion rates [2][7] - Large language model features added to mini-programs for smarter customer responses and personalized recommendations [2][7] - AI tools applied in gaming to enhance content creation speed and scale [7] Business Segment Performance - Value-added services (VAST) accounted for 50% of total revenue, with social networks at 18%, domestic games at 22%, and international games at 10% [8] - Marketing services contributed 19% and financial technology and commercial services 30% to total revenue [8] Future Outlook - Continued exploration of AI commercialization opportunities, despite challenges in user payment models in China [4][17] - Anticipated sustained growth in advertising revenue, with AI expected to enhance targeting and conversion rates [11][20] - Ongoing investment in AI and cloud services to meet increasing external enterprise demand [20] Additional Insights - The gaming business is evolving towards a platform model, reducing revenue volatility [21] - Government anti-inflation measures may reduce competition but could accelerate industry consolidation, requiring strategic adjustments [22] - Commercial payment trends show improvement, with transaction volumes growing despite declining average transaction sizes [23] Conclusion Tencent Holdings demonstrated robust growth across various segments in Q2 2025, leveraging AI technology to enhance advertising and gaming experiences while maintaining a strong financial performance. The company is well-positioned for future growth, particularly in the realms of AI and cloud services.

Core Insights - Electronic Arts launched an open beta for Battlefield 6, which quickly faced issues with cheaters [1][2] - The company reported 104,000 instances of potential cheating and stopped 330,000 attempts to cheat within the first two days [2] Anti-Cheat Measures - Electronic Arts employs a kernel-level anti-cheat system called Javelin, which has high privileges on users' computers to monitor for cheats [2] - The system is not foolproof, and the company acknowledges that it cannot guarantee the absence of cheaters [4] - Secure Boot is utilized as an additional security measure, but it is not a complete solution [5] Industry Context - Cheating remains a widespread issue in online gaming, affecting various companies including Riot Games and Activision, which have also implemented kernel-level anti-cheat systems [8][9] - Other companies, like Riot Games, have developed multi-faceted approaches to combat cheating, including hardware fingerprinting and community infiltration [10]

E-commerce Trends - The report highlights prominent e-commerce platforms like Nike, Amazon, Airbnb, IKEA, Sephora, and H&M [1] - Mobile app distribution is represented by the App Store and Google Play [1] Gaming Industry Overview - The document lists popular games across mobile and PC platforms, including Free Fire, Mobile Legends, PUBG, Minecraft, LoL, Valorant, Roblox, Fortnite, PlayStation, and Steam [1] Entertainment Consumption - Streaming and social platforms such as Netflix, Spotify, Twitch, and Discord are noted [1] Travel and Technology Convergence - The travel sector is represented by Entravel hotel bookings and Xpin global eSIM [1] Cryptocurrency Integration - Bitget Wallet promotes a "Shop with Crypto" zone, indicating a growing trend of cryptocurrency adoption in e-commerce [1]

Core Viewpoint - Tencent is expected to report first-quarter 2025 earnings on May 13, with earnings estimated at 88 cents per share, reflecting an 18.92% year-over-year growth, and revenues projected at $24.26 billion, indicating an 8.89% year-over-year increase [1]. Group 1: Earnings Performance - Tencent has surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 11.65% [2]. - The upcoming earnings report is anticipated to reflect the impact of various ongoing initiatives across gaming, advertising, fintech, and AI infrastructure [3]. Group 2: Gaming Sector - The domestic gaming sector is expected to show continued momentum from Q4 2024, supported by popular titles such as Honor of Kings and contributions from new releases like DnF Mobile and Delta Force [4]. - All five of Tencent's highest-grossing games recorded year-over-year daily active user increases during the 2025 Spring Festival, indicating sustained user engagement [4]. - Deferred revenue, which grew by a high-teens percentage year-over-year in 2024, is expected to positively impact the top line for the quarter [4]. Group 3: Advertising Services - Marketing services revenues increased by 17% year-over-year in Q4 2024, driven by AI enhancements and strong demand from various sectors including e-commerce and healthcare [5]. - Video Accounts Marketing Services revenues grew over 60% year-over-year, while Weixin Search ad revenue more than doubled, suggesting continued advertising growth [5]. Group 4: FinTech Sector - In the fintech segment, commercial payment revenues were flat year-over-year in the previous quarter, with transaction volumes rising but average selling prices under pressure [6]. - This trend is expected to continue in Q1 2025, with improving consumer demand but ongoing supply-side pricing pressures [6]. Group 5: AI Development - The AI-native application Yuanbao saw a 20-fold increase in daily active users from February to March, although revenue impact in Q1 is expected to be limited due to GPU supply constraints [7]. - Tencent significantly increased its investment in AI development in Q4 2024, with a 21% year-over-year rise in R&D expenses and a 421% increase in capital expenditures [8]. - The company plans to further boost R&D spending and capital expenditures in 2025 to enhance AI infrastructure and model development [8].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HK$681, indicating an expected share price increase of 47.9% from the current price of HK$460.40 [2][7]. Core Insights - The 2025 Spark Game Conference showcased a total of 46 game titles, including 26 new games, which is a 35% increase from the previous year. Key titles such as HoK: World, Roco Kingdom, Valorant, and The Finals received significant attention from viewers [1]. - Tencent's strength in self-development and publishing capabilities was highlighted, with a diverse range of game genres presented from both domestic and global studios [1]. - The report emphasizes the positive user feedback and engagement during the conference, suggesting a constructive outlook for Tencent's gaming segment [1]. Summary by Sections Self-Development Games - Tencent presented 18 games from its in-house studios, including notable titles like HoK and CODM, which achieved over 1 billion downloads in 2024 [4][5]. Publishing Games - A total of 13 new licensed titles were showcased, including Path of Exile 2 and The Finals, indicating a robust pipeline for Tencent's publishing segment [5]. Investment Games - Eight games from Tencent's investees were highlighted, including Phantom Blade Zero and Dune: Awakening, showcasing Tencent's strategic investments in the gaming industry [6]. Valuation - The target price of HK$681 is derived from a sum-of-the-parts (SOTP) valuation approach, applying various price-to-earnings (P/E) ratios to different segments, including online games, advertising, social networks, fintech, and cloud services [7].