Vi e w p o i n t | 01 Dec 2025 15:29:33 ET │ 14 pages China Internet Global Aspiration of China AI Assistant Chat: From Doubao To Dola CITI'S TAKE As highlighted in our 1H26 outlook, with AI adoption brisk, competition among China's AI players in 2026 could intensify – from AI cloud infra, to chatbots, to applications. In addition to domestic markets, penetration to global markets has become an important aspiration for Chinese Internet/AI companies, to export AI technology to global users and, more importan ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **China Internet and AI industry**, particularly the competitive landscape of AI chatbots and their global aspirations. Core Insights and Arguments 1. **AI Adoption and Competition**: The rapid adoption of AI is expected to intensify competition among Chinese AI players in 2026, covering areas from AI cloud infrastructure to chatbots and applications [1][3] 2. **Global Market Penetration**: Chinese Internet and AI companies are increasingly looking to penetrate global markets to export AI technology and explore monetization opportunities, as direct-to-consumer monetization in China is challenging [1][5] 3. **ByteDance's Position**: ByteDance's AI assistant, Dola, along with Doubao, has achieved a combined total of approximately **250 million MAUs**, ranking it as the **3 AI chat globally** [1][3][11] 4. **Dola's Growth in Emerging Markets**: Dola has shown significant growth in emerging markets, with MAUs in Indonesia rising from **7.8 million** in July 2025 to **17.4 million** in November 2025, and in the Philippines from **9 million** to **12.5 million** in the same period [4][31] 5. **Competitive Landscape in China**: In China, Doubao leads with **197 million MAUs** and **54 million DAUs** as of October, followed by DeepSeek and Tencent's Yuanbao [2][8] Additional Important Insights 1. **Challenges in Monetization**: Many AI chatbots face difficulties in charging subscription fees directly from consumers, prompting a shift towards global markets [5][48] 2. **Potential Threats to Local Services**: If Dola becomes a dominant AI gateway in emerging markets, it could challenge the relevance of local e-commerce platforms like Shopee and superapps like Grab [5][48] 3. **Dola's Compliance Issues**: Dola, which was previously known as Cici, faces compliance challenges due to its need to access local content and understand cultural nuances, leading it to utilize widely accepted overseas models like GPT and Gemini instead of Doubao's LLM [47][45] 4. **Future Monitoring**: Continuous monitoring of the progress of Doubao and Dola is essential to assess their impact on the competitive landscape in both China and global markets, particularly regarding their potential challenges to major players like Alibaba, Tencent, and Baidu [49]

Core Insights - The article highlights the significant impact of artificial intelligence (AI) on the financial performance and capital expenditure strategies of major tech companies, indicating that AI is now a critical component of their business models [3][5][14]. Group 1: Big Tech Performance - In Q3 2025, major tech companies like Microsoft, Alphabet, Amazon, Meta, and Apple reported strong revenue growth driven by AI and cloud services, with double-digit revenue gains [3][5]. - Microsoft experienced an 18% year-on-year revenue increase to $77.7 billion, largely due to demand for AI-enhanced Azure services, with capital expenditure reaching nearly $35 billion [9]. - Alphabet's revenue rose 16% to $102.3 billion, benefiting from enterprise AI demand, and it increased its 2025 capex guidance to $91–93 billion [9]. - Amazon's capital expenditure for the first three quarters of 2025 was $89.9 billion, with AWS revenue growing 20% in Q3, marking its fastest growth in years [9]. - Meta reported a 26% year-on-year revenue growth, with Q3 capex reaching $19.4 billion, as it plans to invest heavily in AI infrastructure [9]. - Apple achieved a record $94 billion in revenue for its June quarter, emphasizing significant growth in AI investments across its devices and services [9]. Group 2: Alibaba and Tencent's Strategies - Alibaba reported a 5% year-on-year revenue increase to RMB 247,795 million (US$34,769 million) but faced a 53% decline in net income to RMB 20,612 million (US$2,893 million) due to heavy investments [7]. - Tencent's revenue rose 15% year-on-year to RMB 192.9 billion (about $27 billion), with net profit increasing by 19%, showcasing resilience amid economic challenges [8]. - Tencent's capital expenditure in Q3 2025 was approximately RMB 13 billion (~$1.8 billion), down 24% from the previous year, indicating a more conservative spending approach compared to U.S. counterparts [13]. - Tencent's advertising revenue surged 21% year-on-year, attributed to AI-driven improvements in ad targeting and creativity [10]. Group 3: AI Infrastructure Investment - Big Tech companies are treating AI and cloud infrastructure as foundational investments, with capital expenditure profiles resembling national-scale infrastructure projects [6]. - The article notes a divergence in strategies, with U.S. firms focusing on building extensive AI infrastructure while Tencent emphasizes integrating AI into its existing ecosystem [14][19]. - The heavy spending on AI infrastructure by U.S. companies is solidifying their market dominance, creating a competitive landscape where smaller players may struggle to keep pace [14]. Group 4: Future Outlook - The article suggests that the AI investment cycle is global and shows no signs of slowing, with companies needing to demonstrate that their AI investments can drive sustainable growth [17][18]. - The contrasting strategies of U.S. tech giants and Chinese companies like Alibaba and Tencent may shape the future of AI monetization and efficiency [19].

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 on China's Internet Sector Industry Overview - The conference call focused on the **China Internet Sector**, particularly trends in **AI application and monetization** within the industry [2][3]. Core Insights 1. **AI Commercialization Acceleration**: - The call reaffirmed that **cloud services** and **advertising** are the most visible areas for AI monetization. AI chatbots are gradually integrating transactional functions, which could enhance advertising and commerce [2][3]. 2. **Cloud Demand Growth**: - AI adoption has significantly boosted cloud demand in China, especially after the introduction of **DeepSeek**. The demand is primarily driven by model training, deployment, and the rollout of AI applications. Despite LLMs not generating substantial direct revenue yet, Chinese Cloud Service Providers (CSPs) can cross-sell traditional cloud services, potentially leading to robust revenue growth in 2026 [3][4]. 3. **AI Chatbots and Monetization**: - AI chatbots are showing early signs of integrating transactional functions, similar to trends seen internationally. For instance, Bytedance's **Doubao** chatbot is embedding product recommendations in search results, linking users to e-commerce platforms. This trend is expected to accelerate consumer-facing monetization through ads and transactions [4][5]. 4. **Internet Leaders' Strategies**: - **ByteDance**: Rapid revenue growth in its cloud business, with increasing traction in its chatbot offerings. - **Tencent**: AI has become strategically important, enhancing traffic for its chatbot **Yuanbao**. - **Alibaba**: Focused on accelerating cloud revenue, with potential for deeper integration of AI into its commerce ecosystem. - **Baidu**: Developing a full-stack AI footprint, with its AI capabilities improving [5]. Emerging Opportunities - The expert identified several emerging opportunities in AI marketing, AI-hardware integration, and multimodality for advertising and content production, expected to grow into 2026 [2][3]. Risks and Challenges - Key risks to the China internet sector include: - Evolving competitive landscape and intensifying competition - Rapid technological changes and shifting user preferences - Uncertain monetization strategies - Rising costs related to traffic acquisition and content promotion - Regulatory changes [7]. Conclusion - The insights from the call suggest a positive outlook for AI monetization in China's internet sector, particularly through cloud services and advertising, while also highlighting the need for companies to navigate various risks and challenges effectively [2][3][7].

Core Insights - Alibaba Group Holding is redesigning its flagship mobile AI app to resemble OpenAI's ChatGPT, aiming to enhance its competitive position against major Asian rivals [2][4] - The app will be renamed Qwen and will integrate more agent-style capabilities to facilitate shopping across Alibaba's services [3][6] - The long-term goal is to develop Qwen into a fully capable AI agent, with plans for an international version and significant internal resources allocated for the redesign [5][9] E-commerce Integration - Alibaba is leveraging its traditional strength in e-commerce to attract users to the revamped Qwen app, especially as the e-commerce landscape shifts towards AI-driven models [6][7] - The app will initially remain free, with potential for future monetization as the user base grows [7] Payment Infrastructure - Alibaba is overhauling cross-border payment systems within its $35 billion e-commerce ecosystem, focusing on tokenization to enhance global settlement processes [8][9] - A new payment network utilizing a tokenized, stablecoin-like system for international B2B transactions is expected to launch by the end of the year [9] AI Growth and Performance - Alibaba has reported significant growth in AI-related offerings, with its cloud business becoming the fastest-growing division [10]

Core Insights - Tencent Holdings reported a 15% increase in third-quarter revenue, reaching 192.9 billion yuan (US$27.1 billion), compared to 167.2 billion yuan in the same period last year [1] - Net profit rose by 19% to 63.1 billion yuan, exceeding the Bloomberg analyst estimate of 55.9 billion yuan [1] Revenue and Profit Performance - Revenue for the third quarter was 192.9 billion yuan, a 15% increase year-over-year from 167.2 billion yuan [1] - Net profit increased to 63.1 billion yuan, a 19% rise compared to the previous year [1] AI Investments and Growth - The company's strategic investments in AI are enhancing business areas such as ad targeting and game engagement, as well as improving efficiency in coding and production [3] - Tencent has experienced over a 20% increase in research and development efficiency due to AI-powered automation [5] - 90% of Tencent's engineers are utilizing the CodeBuddy IDE, which is powered by the Hunyuan foundational model [5] AI Model Development - Tencent has open-sourced more than 30 new AI models this year, including leading 3D generation models and models simulating the physical world [6] - The Hunyuan Image 3.0 model launched in September has surpassed Google DeepMind's Nano Banana as the leading image generation model [6] User Engagement with AI Applications - The AI chatbot app Yuanbao had 32 million monthly active users in September, making it the third most used AI app in China [7]

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.

Summary of Tencent Holdings Ltd. Conference Call Company Overview - **Company**: Tencent Holdings Ltd. - **Industry**: China Internet and Other Services - **Current Stock Price**: HK$645.00 (as of September 16, 2025) - **Market Capitalization**: US$769,507 million - **Price Target**: HK$700.00, representing a 9% upside potential Key Focus Areas - **Digitalization and Globalization**: Tencent's cloud development emphasizes enhancing efficiency through digitalization and exploring new growth drivers via globalization [1][2] - **AI Adoption**: Tencent is recognized as a leading adopter of AI technologies, particularly in consumer applications, supported by its robust WeChat ecosystem [1] Core Business Developments - **AI Product Launches**: Tencent has introduced various AI efficiency enhancement products, including: - Enhanced cloud agent development platform - A comprehensive suite of 2C and 2B AI products [2] - **SAAS + AI Toolkit**: Upgrades to AI LLM infrastructure focus on optimizing computing power and model efficiency, with multiple open-sourced models launched [3] Performance Metrics - **Revenue Growth**: Tencent reported a 20% increase in marketing revenue and a 22% growth in gaming revenue in Q2 [9] - **User Engagement**: Significant increases in user engagement metrics, such as: - AI MAU for QQ browser increased by 17.8 times since April - Tencent Meeting's AI MAU grew by 150% year-over-year [7] Global Expansion Strategy - **International Business Growth**: Tencent's international business has achieved double-digit growth, with overseas clients doubling year-over-year [12] - **Infrastructure Investments**: Tencent is expanding its global infrastructure, including a US$150 million investment in a data center in Saudi Arabia and a third data center in Osaka [12] Financial Projections - **Revenue Forecast**: Projected net revenue growth from RMB 660.3 billion in 2024 to RMB 884.3 billion by 2027 [4] - **Earnings Per Share (EPS)**: Expected EPS growth from RMB 20.63 in 2024 to RMB 30.59 in 2027 [4] Risks and Challenges - **Market Competition**: Potential risks include intensified competition in social networks and advertising, regulatory uncertainties in the gaming industry, and tightened regulations amid US-China tensions [16] - **Execution Risks**: Successful execution of new game launches and maintaining market share in social and short video ads are critical for growth [16] Analyst Ratings - **Stock Rating**: Overweight - **Industry View**: Attractive - **Valuation Methodology**: Base case valuation of HK$700 based on a sum of the parts analysis [13][14] Conclusion Tencent Holdings Ltd. is positioned for continued growth through its focus on digitalization and globalization, supported by strong AI adoption and significant investments in infrastructure. However, the company faces challenges from market competition and regulatory environments that could impact its performance.

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: China Internet and AI Services - **Overall Industry View**: Attractive outlook for the China Internet sector, particularly in AI applications and services [3][4][19] Core Insights - **AI Adoption**: - 18% of enterprise workload is expected to be replaced by AI within three years [20] - Rapid enterprise adoption of AI is noted, but monetization of AI applications may lag behind [14][19] - **Investment Trends**: - Major players in the industry are ramping up capital expenditures (capex) on AI technologies [8][27] - Total capex by top internet players is projected to reach Rmb 383.768 billion by 2030 [25] - **Consumer and Enterprise AI Demand**: - Consumer usage of AI is projected to grow from Rmb 5.801 million in 2023 to Rmb 555.975 million by 2030, reflecting a compound annual growth rate (CAGR) of 39% [25] - Enterprise AI software spending is expected to increase significantly, with projections of Rmb 249.860 billion by 2030 [25] Company-Specific Insights - **Tencent**: - Strong visibility in consumer AI monetization, particularly through advertising [34][39] - Daily active users (DAU) for Yuanbao, Tencent's AI assistant, are ramping up, integrating AI into WeChat [41] - Long-term annual ad revenue from Video Accounts is estimated to reach Rmb 50 billion [47][50] - **Alibaba**: - Alicloud revenue is expected to double in three years, indicating strong growth potential [52] - Facing near-term earnings pressure due to intense competition in food delivery and quick commerce [56][62] - **Baidu**: - Limited visibility in core advertising turnaround, with core revenue under pressure [92][100] - Ernie Bot has seen significant user growth, with plans for further enhancements in AI capabilities [100][102] - **Meituan**: - Intense competition in the food delivery sector is expected to lower long-term profitability [62][75] - Quick commerce market share is projected to be split among multiple players, impacting profitability [75][78] - **PDD Holdings**: - Strong momentum for Temu, with expectations of GMV growth of 45% year-over-year to US$77 billion in 2025 [114][116] Market Dynamics - **Competition**: - The food delivery market is experiencing aggressive competition, with significant investments from major players like JD and Alibaba [74][75] - Price wars are leading to unsustainable practices, prompting regulatory scrutiny [74][75] - **E-commerce Growth**: - The e-commerce market in China is projected to continue expanding, with online retail sales growing by 6.3% year-over-year in 2Q25 [103][104] Additional Insights - **AI Model Development**: - Major Chinese tech firms are developing proprietary AI models and integrating them into their platforms, enhancing their competitive edge [9][10] - **Consumer Behavior**: - Increased consumer engagement with AI applications is expected to drive growth across various sectors, including e-commerce and social media [25][27] This summary encapsulates the key points discussed in the conference call, highlighting the trends, company-specific insights, and market dynamics within the China Internet and AI services sector.