Tencent posts 15% revenue jump, sustaining growth without splashy AI bets

[SHENZHEN, China] Tencent Holdings posted a faster-than-anticipated 15 per cent rise in revenue, sustaining the steady growth that’s helped the social media leader attract investors despite eschewing splashy investments in AI infrastructure.

China’s most valuable company reported sales of 192.9 billion yuan (S$35.3 billion) for the three months ended September, versus an average estimate of 188.8 billion yuan. Net income for the period rose to 63.1 billion yuan.

The results underscore how Tencent can afford to take a more measured approach to AI development and investment than many of its rivals.

Unlike Alibaba Group Holding and ByteDance, which have ploughed billions into AI infrastructure and product roll-outs, the Shenzhen company is focusing more on integrating the technology into its core money-making services including the social media platform WeChat and game publishing.

That approach – also in contrast to Silicon Valley giants from Meta Platforms to Microsoft – is underpinned by high-margin online content. Tencent’s homegrown developers scored last year with shooter hit Delta Force, with 30 million daily players and now the fulcrum of a global push. Years of investments in major Western studios also bore fruit with popular PC releases this summer like the zombie-slaying title Dying Light: The Beast.

Tencent is one of the few major Chinese tech companies to report significant quarterly earnings growth, at a time rivals including Alibaba, JD.com and Meituan are waging a price war in online commerce. The company’s market value has surged US$280 billion this year, yet trades still at a discount to global peers.

Investors have recently begun to reward Tencent’s approach. The stock is up around 4 per cent this month, while rivals Alibaba and JD have fallen in Hong Kong. Bears have retreated on Tencent since earlier this year, with short interest at less than 0.1 per cent of its free float, S&P Global data show.

Alibaba this year managed bigger market gains by grabbing bigger headlines on the AI front. But Tencent has been making progress with its Hunyuan model. It’s also utilising generative technology in game creation and other areas of its business empire, while embedding AI features in long-running titles including Honor of Kings.

“Tencent is on track to deliver earnings growth in the high-teen percentage range this year, underpinned by AI enhancements in video-game design and ad placement.

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In contrast to Alibaba’s “Big Bang” approach, Tencent’s lower-risk focus on leveraging AI internally also stands a higher chance of generating an immediate payback,” said Robert Lea and Jasmine Lyu, analysts at Bloomberg Intelligence

“Though the uncertain geopolitical backdrop presents risks, Tencent remains better positioned to navigate them than its e-commerce peers. Tencent should deliver average annual free cash flow growth in the 10-15 per cent range through 2025 to 2028, underpinned by a stabilising regulatory environment and ongoing cost discipline.”

For now, WeChat remains the crown jewel of Tencent’s sprawling online business as it expands its footprint in areas like mini-games, live shopping and advertising. Tencent also envisions the super-app as the foundation of its long-term AI strategy, hosting a suite of agentic tools to automate tasks for users.

In September, Tencent recruited a prominent language-agent researcher from OpenAI, sparking speculation about his compensation. Executives have said the company won’t splurge on hiring or marketing on unproven ventures. BLOOMBERG