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.

Financial Performance Highlights - Total revenue for FY2024 reached RMB 660.3 billion, an increase of 8% year-over-year[12] - Gross profit for FY2024 was RMB 349.2 billion, up 19% year-over-year[12] - Non-IFRS operating profit for FY2024 was RMB 237.8 billion, representing a 24% year-over-year increase[12] - Non-IFRS net profit attributable to equity holders for FY2024 increased by 41% year-over-year to RMB 222.7 billion[12] - Marketing Services revenue grew by 20% year-over-year in FY2024, reaching RMB 121.4 billion[12] Business Segment Performance - Value-added Services revenue increased by 7% year-over-year to RMB 319.2 billion in FY2024[12] - Domestic Games revenue increased by 10% year-over-year to RMB 139.7 billion in FY2024[12] - International Games revenue increased by 9% year-over-year to RMB 58.0 billion in FY2024[12] - FinTech and Business Services revenue increased by 4% year-over-year to RMB 212.0 billion in FY2024[12] AI Investment and Development - The company is investing heavily in its proprietary HY Foundation Model since 2023[17] - AI cloud revenue approximately doubled year-over-year in FY24[22] - Video Accounts marketing services revenue grew over 60% year-over-year[61] Shareholder Returns - The company executed a share buyback of HKD 112 billion (+127% year-over-year) in FY24[11] - A cash dividend of HKD 32 billion (+39% year-over-year) was paid in May 2024[11] - Proposed 2024 annual dividend of HKD 4.50 per share (up 32% year-over-year) or HKD 41 billion for the year ended 31 December 2024[84]