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Hannah Wang

Ann Cao

Tencent Holdings’ second-quarter earnings beat analysts’ forecasts, as revenue from artificial intelligence (AI) boosted the bottom line of the world’s largest video games publisher and operator of the Chinese super app WeChat.
Net profit rose 16 per cent to 56 billion yuan (US$7.81 billion) in the three months that ended in June, according to global accounting standards. Sales increased for the 11th quarter, jumping 15 per cent to 184.5 billion yuan and beating the consensus estimate of 19 analysts in a Bloomberg survey.
Shenzhen-based Tencent, one of China’s largest technology behemoths, was able to grow its sales and profitability because “we invested in, and also benefited from, utilising AI”, the company said in its earnings press release on Wednesday.
The company’s shares rose 4.7 per cent amid a rising market in Hong Kong to close at HK$586 before its results were announced. The stock has gained 40.5 per cent this year.

Tencent said that revenue from “marketing services” increased 20 per cent to 35.8 billion yuan for the second quarter “primarily due to AI-driven improvements to our advertising platform and enhancements to the Weixin transaction ecosystem”. WeChat is marketed as Weixin on the mainland.
The company “exceeded expectations” in the use of AI to improve conversion rates in advertising, according to Charlie Chai, vice-head of research at consultancy 86Research. “They have also done a great job of increasing traffic for the WeChat video channel,” he added.
Chai, however, pointed out that there was some “overexcitement” regarding Tencent’s advertising business, even though this was not a major revenue contributor to the company.
Revenue from Tencent’s fintech and business services segment grew 10 per cent from a year ago to 55.5 billion yuan during the quarter, on the back of “increased enterprise customer demand for AI-related services, including GPU [graphics processing unit] rental and API [application programming interface] token usage”, the company said.
Video games continued to be a significant earnings contributor during the quarter, with domestic sales rising 17 per cent to 40.4 billion yuan.
“Our games performed well in terms of users and revenue as evergreen games such as Honour of Kings and Peacekeeper Elite evolve into platforms while increasing their usage of AI, and as new games such as Delta Force broke out,” Tencent co-founder, chairman and CEO Pony Ma Huateng said during a conference call with analysts on Wednesday.

Still, some analysts expected Delta Force – with more than 20 million average daily active users, according to Tencent – to not have staying power. “While Delta Force gained much attention this year … the sustainability of its growth is still questionable,” Chai of 86Research said.
Overseas games revenue surged 35 per cent to 18.8 billion yuan on the popularity of PUBG Mobile, as well as the newly released Dune: Awakening game.
AI has become an increasingly important driver of growth in terms of game content, engagement and monetisation, according to Tencent chief strategy officer James Mitchell. He said AI enabled the company to provide more humanlike virtual teammates in games and conduct game marketing activities more efficiently.
Bolstered by strong revenue and earnings, Tencent has boosted its capital spending. Its capital expenditure more than doubled to 19.1 billion yuan in the quarter, in a sign of aggressive investments in AI.
Tencent president Martin Lau Chi-ping, meanwhile, said the company was going to spend “more smartly” and seek ways to improve cost efficiency in its AI investments. “We have to spend smartly, rather than just saying we’re going to go all in on buying a lot of chips, hiring a lot of people and doing a lot of marketing,” he said.
The company was also working on software improvements to put more workload on the same number of chips it has, considering the uncertainties surrounding US chip imports.
“We don’t really have a definitive answer on the import situation yet,” Lau said. “We do have enough chips for training and continuous upgrade of our existing models, and we also have many options for inference chips”.


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Net profit rose 16 per cent to 56 billion yuan (US$7.81 billion ) while sales jumped 15 per cent to 184.5 billion yuan


Net profit rose 16 per cent to 56 billion yuan (US$7.81 billion ) while sales jumped 15 per cent to 184.5 billion yuan.


Tencent’s 2nd-quarter sales, profit top forecasts as AI gives China’s tech giant a leg up

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Net profit rose 16 per cent to 56 billion yuan (US$7.81 billion ) while sales jumped 15 per cent to 184.5 billion yuan

Net profit rose 16 per cent to 56 billion yuan (US$7.81 billion ) while sales jumped 15 per cent to 184.5 billion yuan