Prosus jewel TenCent bucks trend, plans cautious AI spent after results beat estimates

Key topics:Q2 revenue up 15%, beating forecasts on gaming and ad growthPrudent AI investment focus, integrating tech into servicesWeChat, gaming pipeline key to sustaining long-term growth.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Bloomberg News.Tencent Holdings Ltd. promised prudence in AI spending despite faster-than-anticipated growth across its gaming and advertising businesses, suggesting China’s most valuable company intends to adopt a more measured approach to artificial intelligence development than many of its global rivals.The country’s social media leader on Wednesday reported revenue jumped 15% to 184.5 billion yuan ($25.7 billion) in the June quarter, about 3% higher than analysts’ projections. That was driven by double-digit growth in most major business segments including advertising, which it attributed to AI-driven enhancements. It also beat expectations on net income, sending shares in major shareholder Prosus NV as much as 5% higher in Europe. Tencent is accelerating spending on AI research after rivals from Alibaba Group Holding Ltd. to ByteDance Ltd. launched models to compete with the likes of OpenAI and Anthropic. But while others seek to outdo each other with a procession of platforms, Tencent’s approach focuses more on integrating the technology into its services and content — a point it reinforced on Wednesday. DeepSeek’s R1 and its own Hunyuan model help power a suite of products and games, while Tencent’s cloud unit rents out computing to clients keen to train or run AI systems.The company is increasing capital spending — to the tune of 19 billion yuan in the second quarter — but doesn’t espouse hiring droves of people or spending big on marketing services with as-yet unrealised potential, President Martin Lau told analysts. “We also have to be spending smartly, rather than just saying we’re going to go all-in and spend on buying a lot of chips, and sort of hiring a lot of people and doing a lot of marketing,” Lau said. Tencent will “spend in the right tempo.”When it comes to one of the costlier aspects of AI development — chips like those made by Nvidia Corp. — Tencent has stockpiled enough processors for its purposes. Beijing has urged local firms to refrain from using the US company’s H20, even as Washington has begun allowing Chinese buyers..The world’s biggest games publisher kicks off a closely watched earnings season for Chinese big tech firms, which are riding investor euphoria around the breakout success of DeepSeek. After years of regulatory scrutiny and Covid-era disruption, the country’s biggest tech firms are once again ramping up deals and competing fiercely for users to propel growth..Read more:.Microsoft’s Q2 revenue surges 18%, driven by AI and cloud success.Like Big Tech in the US, much of the industry’s attention is focused on how to harness AI — and monetise it. Tencent counts on marquee gaming franchises and super-app WeChat to fund such initiatives. On Wednesday, it reported a faster-than-expected 17% rise in net income, driven by improving margins across most divisions.The Shenzhen firm has gained more than $170 billion of market value this year, though some analysts think it remains undervalued relative to peers such as Meta Platforms Inc. That 30% gain in 2025 trails Alibaba, whose Qwen family of models consistently ranks among the industry’s top performers. A potential global downturn this year — coupled with the Trump administration’s tariffs campaign – threatens to hurt Tencent’s sprawling online businesses from payments to advertising and cloud computing. .What Bloomberg Intelligence Says.Tencent’s margin may have peaked as rising costs — much of it AI-related — drove the non-Gaap operating profit margin down 100 bps sequentially in 2Q to 37.5%, despite a boost from AI-targeted ads, International Games and Fintech. Still, the solid 2Q results, which were modestly ahead of consensus, provide reassurance its business is on track even with the backdrop of tariff uncertainty. Geopolitical tensions and the economic uncertainty remain key risks to Tencent’s outlook. - Robert Lea and Jasmine Lyu, analysts.Tencent is trying to sustain growth at its games division, still the largest source of the company’s revenue. It scored some of 2024’s biggest hits from DnF Mobile to Delta Force. Beyond earnings, the market is looking forward to next Tuesday’s launch of Valorant Mobile, a highly-anticipated smartphone version of Riot Games Inc.’s seminal title. Other upcoming titles include an open-world game set in the Honor of Kings universe, and the company is set to unveil new ones next week at Gamescom in Germany.It’s also more focused on protecting margins than some of its rivals. Tencent has stayed out of an increasingly cutthroat battle in e-commerce, where Alibaba, Meituan and JD.com Inc. have sought to outspend each other with subsidies. The trio will report earnings in coming weeks, starting with JD.com on Thursday..With a billion-plus users, WeChat remains Tencent’s most dependable asset as it shoulders more of the burden on monetization in areas from mini-games to advertising. The ubiquitous Chinese app is carrying more advertising within features like search and short-video feeds, chipping away at TikTok-owner ByteDance’s key revenue stream. Yet WeChat Pay faces a renewed battle with Alibaba-affiliate Ant Group Co., which has garnered 100 million users for a tap-to-pay feature at stores and restaurants.Tencent hopes WeChat will remain the killer app of the generative AI era. Its ecosystem of mini-programs, executives argue, could evolve to become an operating system for agentic AI tools that autonomously perform tasks on behalf of users. The company has also rolled out a series of AI tools for game designers to generate in-game avatars and assets..© 2025 Bloomberg L.P.

Prosus jewel TenCent bucks trend, plans cautious AI spent after results beat estimates

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