Tencent Holdings Ltd. 4Q25 Earnings Call Summary Company Overview - **Company**: Tencent Holdings Ltd. - **Industry**: Internet and Other Services in Asia Pacific - **Date of Call**: January 18, 2026 Key Financial Metrics - **Revenue Growth**: Projected revenue increase of 12% YoY, with non-IFRS operating profit (OP) up 14% [1][9] - **Value-Added Services (VAS)**: Revenue expected to rise by 12.0% YoY, with online games growing by 16.7% [2][9] - **Marketing Services**: Anticipated growth of 18.5% YoY, driven by AI ad-tech upgrades [3][9] - **FinTech and Business Services (FBS)**: Expected to grow by 7.5% YoY, impacted by weaker commercial payments [4][9] Revenue Breakdown - **VAS Revenue**: Estimated at Rmb 88.469 billion for 4Q25, with online games contributing Rmb 57.433 billion [12] - **Domestic Games**: Expected to grow by 12.5% YoY - **International Games**: Expected to grow by 25.4% YoY - **Marketing Services Revenue**: Projected at Rmb 41.488 billion, reflecting an 18.5% increase [12] - **FBS Revenue**: Expected at Rmb 60.336 billion, a 7.5% increase YoY [12] Profitability Metrics - **Gross Profit**: Expected to be Rmb 105.653 billion, with a gross margin of 54.8% [12] - **Operating Profit (Non-IFRS)**: Projected at Rmb 67.790 billion, with a non-IFRS operating margin of 35.2% [12] - **Net Profit (Non-IFRS)**: Expected to be Rmb 61.160 billion, reflecting a 10.6% increase YoY [12] Market Position and Strategy - **Price Target**: Maintained at HK$735, implying a 19% upside from the current price of HK$617.50 [5][7] - **Valuation Approach**: Price target derived from a discounted cash flow (DCF) model, with a 10% discount rate and 3% terminal growth rate [16][19] - **Competitive Position**: Tencent is viewed as a leading player in China's online consumer market, with strong revenue growth and earnings visibility [26][27] Risks and Considerations - **Macro Environment**: The company is navigating a macroeconomic slowdown, but remains resilient compared to peers [1][5] - **Regulatory Risks**: Rising competitive and regulatory risks in the industry are acknowledged [5][26] - **Investment in AI**: Initial investments in AI are expected to narrow operating leverage, leading to a slight reduction in non-IFRS OP estimates for 2025-27 by 1-2% [5][9] Future Outlook - **Growth Projections**: Total revenue is expected to grow at a CAGR of 9.1% from 2025 to 2030 [25] - **Earnings Visibility**: Continued focus on monetization across all products and services, particularly in mobile games and fintech [24][26] Conclusion - Tencent Holdings Ltd. is positioned to maintain growth despite macroeconomic challenges, with a strong focus on AI and digital services. The company’s strategic investments and market leadership in various segments provide a solid foundation for future performance.

Core Viewpoint - The company is expected to achieve a 13% year-over-year revenue growth in Q4 2025, driven by strong performance in online gaming and online advertising, despite slightly lower operating profit forecasts due to increased AI-related operating expenses [1][2]. Group 1: Revenue and Profit Forecasts - Total revenue is projected to grow 13% year-over-year to RMB194.8 billion, aligning with consensus expectations [2]. - Value-added services (VAS) revenue is estimated to increase by 14% year-over-year, supported by a 7% growth in social networks and an 18% growth in online gaming [2]. - Online gaming is expected to see a solid 15% year-over-year growth in domestic games, aided by popular franchises and the launch of Valorant Mobile [2]. - Online advertising revenue is anticipated to remain resilient with a 17% year-over-year increase, driven by video accounts, Weixin search, and Moments, benefiting from AI enhancements [2]. - Adjusted operating profit is forecasted to grow 15% year-over-year to RMB68.4 billion, factoring in AI-related operating expenses [2]. Group 2: AI Strategies and Growth Engines - The company is committed to executing consistent AI strategies to foster high-quality growth engines, leveraging its user base, communities, content, infrastructure, and monetization ecosystems [1]. - Key AI strategies include upgrading foundational large language models (LLM), integrating more in-house functionalities, developing diverse AI products, and prioritizing internal capabilities over external monetization [1]. - The company anticipates sustainable growth momentum in gaming and online advertising, supported by ongoing AI investments [1]. Group 3: Valuation and Target Price - The company maintains a "BUY" rating and has slightly raised the sum-of-the-parts (SOTP) target price to HK$742.0 based on updated estimates [4]. - The valuation multiples assigned for 2026E include 18.0x price-to-earnings ratio (PER) for online gaming, 20.0x PER for online advertising, 13.0x PER for fintech and business services, and 3x price-to-sales ratio (PSR) for cloud services [4].

Summary of the China Online Gaming Industry Report Industry Overview - The report discusses the **China Online Gaming Industry** and highlights trends and market performance for 2025, as presented by CNG during the 2025 China Online Gaming Industry Conference in Shanghai on December 19, 2025 [1][2]. Key Trends Identified 1. **High-Quality Development**: Supported by favorable policies, contributing to market growth [1]. 2. **Healthy Domestic Market Growth**: Driven by innovation and evergreen operations [1]. 3. **Robust Overseas Market Growth**: Particularly for self-developed games [1]. 4. **Generative AI Adoption**: Increasing usage in gaming interactions [1]. 5. **Strengthening Social Values**: Empowering the digital economy through gaming [1]. 6. **Minor Protection Measures**: Effective strategies in place to protect younger gamers [1]. 7. **Gaming Education**: Inclusion of gaming professions in senior education to foster talent development [1]. Market Performance - **Market Size**: In 2025, China's online gaming market reached **Rmb350.8 billion**, a **7.68% year-over-year increase**, marking a historical high [2]. - **Gamer Base**: Total gamers in China reached **683 million**, up **1.35% year-over-year**, with a monthly ARPU of **Rmb42.8**, reflecting a **6.2% increase** [2]. - **Domestic Game Market**: In-house developed games generated **Rmb291.1 billion**, growing **11.6% year-over-year** [2]. Mobile Gaming Insights - **Mobile Games Growth**: Increased by **7.9% year-over-year** to **Rmb257.1 billion**, accounting for **73.3%** of the market share [3]. - **Top Genres**: RPGs made up **20%**, strategy games **11%**, and card games **8%** of the top 100 mobile games [3]. - **Mini Games**: The mini game market grew **34.4% year-over-year** to **Rmb53.5 billion**, with in-app purchases contributing **68%** of the revenue mix [5]. PC and Console Gaming - **PC Games**: Grew **15.0% year-over-year** to **Rmb78.2 billion**, driven by evergreen titles and cross-platform launches [6]. - **Console Games**: Experienced significant growth of **86.3% year-over-year** to **Rmb8.4 billion** [6]. - **Web Games**: Continued decline, shrinking **6.7% year-over-year** to **Rmb4.3 billion**, marking the tenth consecutive year of decline [6]. Overseas Market Performance - **Overseas Revenues**: Grew **10.2% year-over-year** to **US$20.5 billion**, with the US, Japan, and South Korea being the top markets [7]. Company Valuations and Recommendations - **Century Huatong**: Target price set at **Rmb22.0**, based on a **20x PE** for 2026, reflecting its position as the third-largest online game company in China [9]. - **NetEase**: Target price of **US$161**, using a sum-of-the-parts valuation [11]. - **Tencent Holdings**: Target price of **HK$751**, based on a SOTP approach with various segments contributing to the valuation [13]. Risks Identified - **Century Huatong**: Risks include delayed game launches and a slowdown in the auto parts business [10]. - **NetEase**: Risks involve potential slowdowns in core titles and advertising demand [12]. - **Tencent**: Risks include revenue slowdowns in PC games, unsuccessful mobile game launches, and economic downturns affecting advertising demand [14]. Conclusion - The China online gaming industry is poised for sustainable growth, driven by innovation, policy support, and expanding overseas markets. Key players like Tencent, NetEase, and Century Huatong are recommended for investment, with specific target prices and associated risks outlined for each company.

Tencent Holdings Research Summary Company Overview - **Company**: Tencent Holdings - **Sector**: Internet/e-Commerce - **Description**: Tencent is a leading provider of messaging services, value-added services, online games, advertising, and e-commerce in China. The social app Weixin has over 1 billion domestic accounts, and Tencent also offers enterprise services like Cloud and IT solutions [11][12]. Key Financial Metrics - **3Q25 Net Income**: Adjusted net income was RMB 70.6 billion, up 18% YoY, exceeding consensus by 7% [16]. - **Revenue**: 3Q25 revenue reached RMB 192.9 billion, a 15% YoY increase [16]. - **Capex**: 3Q25 capital expenditure was RMB 13 billion, below consensus due to chip availability issues [1]. - **2025E Revenue**: Expected to be RMB 750 billion, with a gross profit of RMB 423 billion [15]. Investment Rating and Price Objective - **Rating**: BUY - **Price Objective**: HKD 780, based on a sum-of-the-parts (SOTP) valuation [3][17]. Growth Drivers - **AI Strategy**: Tencent is focusing on AI applications, integrating AI-supported use cases into Weixin. The company is expected to prioritize internal chip use over external sales due to supply constraints [1]. - **Gaming Segment**: Anticipated growth from titles like Delta Force, Valorant Mobile, and Honor of Kings (HoK) [2]. - **Advertising Revenue**: Growth expected from Video Account and Weixin search ads, which have higher gross margins [2]. Financial Projections - **2025E Non-IFRS Diluted EPS**: Expected to be RMB 28.13, reflecting a 18.8% YoY increase [4][15]. - **2026E Revenue**: Projected to reach RMB 821 billion, with a gross profit margin of 57% [15]. - **Free Cash Flow**: Expected to be RMB 145.9 billion in 2025 [9]. Risks and Challenges - **Competition**: Intensifying competition in the gaming and advertising sectors [3]. - **Regulatory Uncertainty**: Potential regulatory challenges in fintech and gaming [18]. - **Macroeconomic Factors**: A weaker macro environment could impact advertising and fintech revenues [18]. Additional Insights - **Market Position**: Tencent maintains a strong market leadership position across various segments, with significant growth potential in monetization through Weixin [12]. - **AI and E-commerce Potential**: The company has substantial upside potential from AI applications and e-commerce growth [12]. - **Debt Management**: Net debt is projected to decrease significantly by 2027, indicating improved financial health [9]. Conclusion Tencent Holdings is positioned for continued growth driven by its strong market presence, innovative AI strategies, and robust gaming and advertising segments. However, investors should remain cautious of competitive pressures and regulatory risks that could impact future performance.

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.

Tencent Holdings Ltd. 3Q25 Earnings Call Summary Company Overview - **Company**: Tencent Holdings Ltd. - **Industry**: China Internet and Other Services - **Market Cap**: Approximately US$749.87 billion - **Stock Rating**: Overweight - **Price Target**: HK$700.00 Key Financial Metrics - **Revenue Growth**: Forecasted to grow by 13% YoY - **Non-IFRS Operating Profit Growth**: Expected to increase by 18% YoY - **Capital Expenditure (Capex)**: Estimated at Rmb320 billion for 2025-27 Revenue Breakdown - **Value-Added Services (VAS)**: Revenue increased by 13% YoY, with online games growing by 18% - Domestic games: +13% - International games: +30% - **Marketing Services**: Revenue growth of 20% YoY, driven by AI ad-tech upgrades - **FinTech and Business Services (FBS)**: Revenue growth of 10%, with FinTech growing by 6% and Business Services by 22% [2][3][4][9] Core Insights - **Gaming Performance**: Strong performance from evergreen games and new launches, with Delta Force achieving record grossing during its anniversary event [2] - **AI Adoption**: Early AI adoption in marketing services is yielding high ROI, with improved click-through rates and user engagement [3] - **Cloud Services**: Despite prioritizing internal AI applications, demand for cloud services is expected to drive revenue growth, albeit at a slower pace compared to competitors [4] Financial Projections - **2025-27 Non-IFRS Operating Profit**: Increased by 1-2% due to higher revenues from games and marketing [5][9] - **Earnings Per Share (EPS)**: Projected to rise from Rmb20.63 in 2024 to Rmb30.70 by 2027 [7][19] Valuation and Investment Thesis - **Valuation Methodology**: Price target based on a sum-of-the-parts approach, with a DCF value of HK$612/share for core businesses and HK$88/share for associate investments [16][20] - **Investment Drivers**: Globalization of gaming, higher social ad monetization, and strategic upgrades in consumer and industrial Internet [27] - **Risks**: Competition in social networks and gaming, regulatory challenges, and potential impacts from US-China tensions [36] Additional Insights - **Market Position**: Tencent is positioned as a leader in China's online consumer market, with most services ranking in the top three by user base [27] - **Share Buybacks**: Recent buybacks are expected to support share price stability [28] - **Long-term Growth Potential**: Continued expansion in the Industrial Internet and AI applications is anticipated to drive future growth [35] Conclusion Tencent Holdings Ltd. is expected to maintain solid growth across all business segments, driven by strong performance in gaming, marketing, and cloud services. The company's strategic focus on AI and capital management positions it well for future opportunities, despite facing competitive and regulatory challenges. The current price target reflects a favorable outlook for investors.

Core Viewpoint - Tencent Holdings (00700.HK) is set to release its Q3 2025 financial report on November 13, 2025, with expectations of mixed performance in revenue and net profit [1]. Financial Performance Expectations - Revenue is projected to be between 183.23 billion to 192.20 billion RMB, reflecting a year-on-year growth of 9.6% to 15.0% [2][4]. - Net profit is expected to range from 51.36 billion to 60.07 billion RMB, showing a year-on-year change of -3.5% to 12.8% [2][4]. - Adjusted net profit is forecasted to be between 59.15 billion to 72.70 billion RMB, with a year-on-year change of -1.1% to 21.5% [2][4]. Recent Sell-Side Insights - Haitong International Securities noted that Tencent exceeded expectations in Q2 2025, achieving a revenue of 184.5 billion RMB, a 15% year-on-year increase [5]. - The adjusted operating profit grew by 18% year-on-year, reaching 69.2 billion RMB, with an operating profit margin of 37.5% [5]. - The gaming sector showed strong growth, with domestic games increasing by 17% and international games by 35% [6]. Business Segment Performance - Gaming: Domestic gaming revenue grew by 17%, while international gaming revenue surged by 35%. The upcoming release of Valorant Mobile is expected to generate approximately 6 billion RMB in annual revenue [6]. - Advertising: Revenue increased by 20%, driven by AI technology that enhanced click-through rates and advertising demand, indicating long-term growth potential [7]. - Financial Technology and Business Services: Revenue rose by 10%, with expectations for continued growth in business services [7].

Summary of China Internet Sector Conference Call Industry Overview - The China Internet sector has shown strong performance in YTD 2025, with a return of +44.8%, outperforming other regions such as SEA (+24.7%), Japan (+21.9%), and the US (+19.2%) [1] - Despite some recovery in valuation multiples, many Internet companies still trade at a discount compared to global peers and other tech/consumer names in China [1] Key Companies and Performance - **Alibaba (BABA)** and **Tencent** are highlighted as core AI plays, demonstrating positive multiplier effects from AI-enhanced growth [1] - **Pinduoduo (PDD)** is noted as a high beta long opportunity, while **Trip.com (TCOM)** and **Full Truck Alliance (YMM)** are also mentioned as potential picks [1] - In the 2Q25 results, 22 out of 49 covered internet companies reported revenue beats, while 25 reported earnings beats [2][10] AI and Monetization - AI is expected to enhance monetization opportunities across advertising, gaming, and transaction conversion, leading to revenue and profit growth in upcoming quarters [3][38] - Initial signs of AI-enhanced ad targeting and game development were observed in 2Q25, boosting investor confidence in future monetization potential [3][38] Quick Commerce Insights - Incremental sales and marketing spending from major players like Alibaba, JD, and Meituan in 2Q25 reached RMB 40-50 billion, indicating a competitive landscape in quick commerce [4] - Quick commerce is projected to capture approximately 10% to low-teen percentages of the e-commerce market in the long run [4] Investment Sentiment and Risks - Investor focus is expected to shift back to companies with strong AI narratives in 2H25, with fund flows rotating from leisure/entertainment names to cloud infrastructure and advertising companies [5] - Risks include muted stimulus policies affecting consumption, persistent tariff uncertainties, and intense competition impacting platform profitability [6] Notable Earnings and Guidance - Meituan's significant profit miss was a notable surprise, while PDD and TCOM exceeded expectations [15] - The overall sentiment on AI-enhanced monetization from Tencent and growing demand from Alibaba positively influenced the investment outlook for large internet companies [15] Share Price Performance - Year-to-date, Alibaba leads with a 59% return, followed by Tencent at 45%, while Meituan underperformed with a -32% return [17] - The divergence in share price performance between Meituan and TCOM began in June, indicating a shift in investor sentiment [19] Valuation and Recommendations - Current P/E ratios for major companies indicate that Tencent (18.7x) and Alibaba (13.9x) are trading below average, suggesting potential for re-rating [30] - Top picks for 2H25 include Tencent and Alibaba as core AI plays, PDD as a high beta long, and Century Huatong as an A-share pick [31][34] Cloud and AI Updates - Alibaba Cloud reported revenues of RMB 33.4 billion in 2Q25, with AI-related revenue maintaining triple-digit growth for eight consecutive quarters [39] - Tencent Cloud's revenues grew significantly, driven by cloud services and improved efficiency [39] - Baidu AI Cloud also showed strong growth, with revenues increasing 27% year-over-year in 2Q25 [39] This summary encapsulates the key insights and developments from the conference call regarding the China Internet sector, highlighting performance, investment opportunities, and risks.

Summary of Tencent Holdings (0700.HK) Conference Call Company Overview - **Company**: Tencent Holdings (0700.HK) - **Industry**: Technology and Internet Services Key Points AI and Business Growth 1. **AI Capex Efficiency**: Tencent emphasizes efficient scaling of AI capital expenditures (capex) with lower intensity compared to global peers, achieving cost efficiencies in data centers and utility costs, which drives down inferencing costs [1][2][10] 2. **AI Model Performance**: The in-house Hunyuan 3D model has achieved leading rankings on Hugging Face, indicating strong performance in AI initiatives, particularly in integrating AI into the WeChat ecosystem while prioritizing user experience and security [2][10] Gaming Sector 3. **Game R&D Efficiency**: AI deployment is expected to enhance game research and development efficiency, improving user experience through AI-generated content and virtual teammates. The focus for domestic games is on user base growth and experience, while monetization will be gradual [3][18] 4. **International Gaming Revenue**: Anticipated revenue recognition from strong performances of games like Brawl Stars and Clash Royale in 2024, with ongoing content updates to maintain user engagement [3][18] Marketing Services 5. **Adtech Upgrades**: Marketing services are set to benefit from AI-driven improvements in analyzing user behavior and purchase intent, which could sustain above-industry ad growth through enhanced click-through rates and conversions [4][10][18] Cloud Services 6. **Cloud Growth Focus**: Tencent aims for high-quality growth in its cloud services, emphasizing international expansion and value-added software, while maintaining healthy margins [5][16] Fintech Developments 7. **Fintech Recovery**: The fintech segment is showing signs of recovery with a narrowing year-over-year decline in ticket sizes, supported by a growing consumer lending business [6][19] Financial Projections 8. **Revenue and EPS Growth**: Forecasts indicate a 13% year-over-year revenue growth and 18% EPS growth for 3Q25E and 2025E, respectively, driven by the unique Weixin ecosystem and gaming assets [10][21] Risks and Challenges 9. **Competitive Landscape**: Key risks include intensified competition in performance-based advertising, potential delays in game launches, and slower-than-expected growth in fintech and cloud businesses [21] Price Target 10. **Investment Rating**: The company maintains a "Buy" rating with a 12-month price target of HK$701, reflecting a potential upside of 16.8% from the current price [23][21] Additional Insights - **User Engagement**: The domestic gaming market has a significant user base, with 400-500 million monthly active users in app-based games and 500 million in mini-games, indicating a strong potential for user conversion [18] - **AI in Advertising**: AI has improved advertising efficiency, leading to higher click-through rates and better content generation capabilities [13][18] This summary encapsulates the critical insights from Tencent Holdings' conference call, highlighting the company's strategic focus on AI, gaming, marketing services, cloud growth, and fintech recovery, alongside financial projections and potential risks.

Core Viewpoint - Analysts are optimistic about Tencent, raising the consensus target price to HKD 688, indicating a potential upside of nearly 16% [1][2] Group 1: Analyst Upgrades - Over twenty analysts have raised Tencent's target price since the earnings report, with a consensus increase of over 5% from HKD 594.50 to HKD 688 [2] - Goldman Sachs has increased its target price from HKD 658 to HKD 701, while also raising revenue and earnings per share forecasts for 2025 to 2027 by 1-6% [3] Group 2: Financial Performance - Tencent's Q2 revenue grew by 15% year-on-year to RMB 184.5 billion, with major business segments like advertising showing double-digit growth [5] - The strong performance is attributed to AI-driven efficiency improvements [5] Group 3: Growth Drivers - AI is identified as a key growth engine, enhancing the efficiency of advertising and gaming businesses, leading to significant revenue increases [5] - The advertising business, particularly through platforms like video accounts, has substantial growth potential due to its low current commercialization level [6] - Tencent's gaming business outlook is stable, supported by new major game releases and a "platformization" strategy, with upcoming mobile game "Valorant Mobile" expected to drive growth [7]