Tencent Holdings reported an 11% increase in second-quarter revenue, reaching 204.8 billion yuan (US$30.4 billion), driven by robust advertising sales and steady gaming income. The results, announced on August 12, surpassed analyst expectations of 202.2 billion yuan, according to LSEG data. However, net profit rose only 0.7% year-on-year to 56 billion yuan, falling short of the anticipated 61.8 billion yuan.
Capital Expenditure Soars
The company nearly tripled its capital expenditure, which surged 176% year-on-year to 52.8 billion yuan for the quarter. This increase is part of Tencent's strategy to bolster its AI capabilities, as it competes with firms like ByteDance and Alibaba. CEO Pony Ma Huateng noted, "As we enter into the third quarter of the year, we are making substantial progress towards building a new, AI-empowered Tencent in terms of intelligence, applications and infrastructure."
Gaming and Advertising Performance
Revenue from value-added services, which includes Tencent's gaming segment, rose 8% to 98.4 billion yuan. Domestic gaming revenue experienced a 17% increase to 47.3 billion yuan, supported by popular titles such as "Honor of Kings". Conversely, international gaming revenue declined slightly by 0.8% to 18.6 billion yuan, influenced by foreign currency fluctuations. Marketing services revenue climbed 22% to 43.6 billion yuan, aided by AI enhancements in advertising within its Weixin ecosystem.
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The results may influence investor sentiment towards technology stocks, particularly in the gaming and advertising sectors, as Tencent's heavy investment in AI could drive future growth. Investors will watch for additional insights on Tencent's AI strategy and its impact on profitability in the upcoming earnings call.
Based on reporting by: businesstimes.com.sg, scmp.com