Tencent Holdings, a global technology conglomerate headquartered in Shenzhen, China, has released its financial results for the first quarter of 2025, showcasing a robust year-on-year growth in both its revenue and net profit. The company’s earnings report, published on Wednesday, highlighted the significant contribution of its core gaming business to this positive performance, experiencing an acceleration in growth during the reported period.
Specifically, Tencent’s total revenue for the first quarter reached 180.02 billion Chinese yuan (approximately $25 billion), surpassing the consensus estimate of 174.63 billion yuan projected by analysts surveyed by LSEG. This represents a substantial 13% increase compared to the revenue generated in the same quarter of the previous year, underscoring the company’s continued expansion across its diverse business segments.
However, while the company’s top-line performance exceeded market expectations, its net profit for the first quarter fell slightly short of analyst predictions. Tencent reported a net profit of 47.8 billion yuan, below the LSEG estimate of 52.2 billion yuan. Despite this slight miss on the bottom line, the reported net profit still demonstrated a healthy 14% year-on-year growth, indicating improved profitability compared to the first quarter of 2024.
A significant driver of Tencent’s strong overall performance was its dominant gaming division. As one of the world’s largest gaming companies, the revenue generated from its popular and high-grossing game titles played a crucial role in bolstering the company’s financial results. The domestic games revenue, which encompasses sales within China, witnessed an impressive 24% year-on-year surge, reaching 42.9 billion yuan. This growth was primarily attributed to the sustained popularity and strong performance of flagship titles such as “Honor of Kings” and “Peacekeeper Elite,” along with the successful contributions from newer additions to its gaming portfolio, including “DnF Mobile.”
Tencent’s international gaming business also demonstrated significant growth, contributing 16.6 billion yuan in revenue during the first quarter, marking a substantial 23% year-on-year increase. This expansion in the global gaming market was fueled by the continued success of popular mobile games like “Brawl Stars” and “PUBG Mobile,” highlighting Tencent’s ability to captivate and monetize a global audience.
Beyond its gaming prowess, Tencent operates WeChat, China’s leading messaging application with an expansive ecosystem of over 1.4 billion monthly active users. This “super app” has evolved into a multifaceted platform, enabling users to engage in a wide array of activities, ranging from mobile payments and social networking to playing games and booking travel. The sheer scale of WeChat’s user base has provided Tencent with a significant opportunity to monetize the platform through advertising, which has emerged as a rapidly growing segment for the technology giant.
In the first quarter of 2025, Tencent’s marketing services revenue experienced a robust 20% year-on-year growth, reaching 31.9 billion yuan. The company attributed this strong performance to “robust advertiser demand” across its various advertising channels within the WeChat ecosystem, including video advertisements, search functionalities, and Mini Programs. Mini Programs, which are essentially lightweight applications hosted within WeChat, have proven to be an effective platform for advertisers to reach and engage with WeChat’s massive user base.
Looking towards the future, Tencent has significantly increased its investment in artificial intelligence (AI) research and development. The company reported that its capital expenditures for the first quarter totaled 27.5 billion yuan, a substantial 91% increase compared to the same period in the previous year. This surge in capital expenditure underscores Tencent’s commitment to advancing its AI capabilities.
The Shenzhen-based company has been actively promoting its AI advancements, including its proprietary AI chatbot named Yuanbao and its foundational AI model known as Hunyuan. In its earnings release, Tencent stated that its “AI capabilities already contributed tangibly to our businesses, such as performance advertising and evergreen games.” The company also highlighted its increased spending on “new AI opportunities,” such as the Yuanbao application and the integration of AI within its Weixin (the Chinese name for WeChat) ecosystem.
Tencent expressed confidence that the “operating leverage from our existing high-quality revenue streams will help absorb the additional costs associated with these AI-related investments and contribute to healthy financial performance during this investment phase.” This suggests that the company believes its core businesses are generating sufficient profits to support its ambitious AI initiatives without significantly impacting overall profitability in the long term.
During an earnings call on Wednesday, Martin Lau, the President of Tencent, elaborated on the company’s AI strategy, noting that many of its investments in crucial hardware like chips and AI technologies are already beginning to generate revenue. He provided examples such as the application of AI to enhance ad targeting capabilities and improve user engagement within its gaming titles.
Responding to a question regarding the tightened chip export restrictions imposed by the United States on China, Mr. Lau acknowledged that the situation is “changing and dynamic.” He reassured investors that Tencent possesses a “pretty strong stockpile of chips” and that the company is actively focusing on strategies to optimize the efficiency of its AI processes in light of these evolving geopolitical factors. This suggests that while Tencent is aware of the potential challenges posed by chip export restrictions, it has proactively taken steps to mitigate the impact and is exploring ways to innovate within the existing constraints.
