Tencent reports strong earnings with revenue and profit growth, but AI investments could impact margins.

From Morningstar: 2025-05-15 09:59:00

Tencent Holdings reported a 13% growth in revenue and an 18% growth in adjusted operating profit for the first quarter, driven by games and advertising. The company also conducted HKD 17 billion in share buybacks, aiming for at least HKD 80 billion in the full year.

Despite strong earnings, Tencent noted that AI investments may take time to yield returns, impacting near-term margins. Uncertainty surrounds the integration of AI into WeChat and monetizing chatbots, hindering forecasted ROI.

Maintaining wide-moat Tencent’s fair value estimate at HKD 710, with shares trading at a 2025 core P/E multiple of 19 times, offering a 27% upside to valuation. The company’s ability to leverage network effects is highlighted by stable user numbers and increased engagement driving strong ad revenue growth.

Tencent’s seamless integration of new products into WeChat’s infrastructure leads to higher profit margins, with minimal upfront investment and low customer acquisition costs. The company’s current share price may already reflect limited incremental earnings from AI investments, potentially surprising investors with future gains.



Read more at Morningstar: Tencent Earnings: Remarkable Start to 2025, but AI…