According to the company’s report, quarterly revenue increased 9% year-over-year to 196.5 billion yuan (approximately $28.9 billion), slightly below market expectations of nearly 199 billion yuan. Net profit reached 58.1 billion yuan, also missing forecasts by a narrow margin.
Gaming remains the core growth engine
Gaming continues to be Tencent’s primary driver of growth. Domestic gaming revenue rose 6%, while internationalal gaming revenue increased 13%, supported by strong performances from titles such as Honor of Kings, Peacekeeper Elite, and Delta Force.
The slower pace compared with previous quarters was partly attributed to the timing of the Lunar New Year holiday, which affected digital consumption patterns in China this year.
Advertising boosted by artificial intelligence
Advertising was one of the company’s strongest-performing segments. Advertising revenue climbed 20% to 38.2 billion yuan, fueled by Tencent’s increasing use of AI-powered algorithms for ad targeting and personalizationization across the WeChat/Weixin ecosystem.
For Tencent, AI is no longer just a research initiative, but a concrete monetization tool capable of improving user engagement and advertising efficiency.
Aggressive AI investment strategy
The real focus of the quarterly report, however, is Tencent’s accelerating push into artificial intelligence. Over the past few months, the company has significantly increased investments to catch up with Chinese rivals Alibaba and ByteDance. In April, Tencent unveiled Hunyuan 3.0, its latest proprietary large language model, developed with contributions from former OpenAI researcher Yao Shunyou.
Capital expenditures for the quarter rose to 31.9 billion yuan, up from 27.5 billion yuan in the same period last year. Tencent also spent heavily promoting its AI chatbot Yuanbao during the Chinese New Year holiday. Management confirmed that AI-related investments will continue to increase throughout 2026.
Investors want proof of AI profitability
Despite strong adjusted profit growth - with non-IFRS net income reportedly up more than 20% year-over-year - investors are beginning to demand clearer evidence that AI investments can generate meaningful financial returns in the short term.
Tencent still benefits from major competitive advantages, including the enormous WeChat ecosystem, with more than one billion users, and the strong cash generation of its gaming division. However, competition in China’s AI market is intensifying rapidly, especially as Alibaba, ByteDance, and emerging startups such as DeepSeek expand aggressively.
Outlook
The quarterly earnings confirm that Tencent remains highly solid in its traditional businesses, but the company has clearly entered a new strategic phase: sacrificing part of its short-term profitability in order to strengthen its position in the global AI race.
The key question for the coming quarters will be whether these massive AI investments can truly translate into long-term structural growth - or whether they will continue to pressure margins and profitability in an increasingly crowded competitive environment.