Tencent Holdings Ltd. reported a 90% surge in fourth-quarter profit Wednesday, driven by strong gains in its gaming and advertising divisions, alongside a ramp-up in artificial intelligence investments. The Shenzhen-based technology giant announced revenue of 172.4 billion yuan ($23.9 billion) for the three-month period ending December 2024, exceeding analyst expectations of 168.9 billion yuan, according to LSEG data.
Net profit attributable to equity holders totaled 51.3 billion yuan, comfortably above the 46.03 billion yuan forecast. Revenue rose 11% year-over-year, while profit nearly doubled, marking one of Tencent's strongest quarterly results in recent years.
Tencent's domestic gaming business posted a 23% annual growth to 33.2 billion yuan, fueled by hits like Honour of Kings and Peacekeeper Elite. International gaming revenue climbed 15% to 16 billion yuan, bolstered by the ongoing success of PUBG Mobile and Tencent's broader overseas push amid slowing growth in China's domestic gaming market.
Marketing services, Tencent's advertising arm, generated 35 billion yuan in revenue, up 17% year-over-year. The company's flagship messaging platform WeChat, known as Weixin in China, now boasts over 1.38 billion monthly active users. Tencent has expanded monetization efforts through AI-enhanced ad placements, video content, and search features.
Artificial intelligence initiatives were a key focus of Tencent's fourth-quarter performance. The company highlighted AI's role in bolstering advertising relevance and enhancing cloud computing services. The company's AI models allow it to serve users with "more relevant ad recommendations," Tencent stated in its earnings release.
Tencent's fintech and business services division, which houses its cloud computing business, reported 56.1 billion yuan in revenue, a 3% increase year-on-year. However, the company acknowledged that growing internal demand for GPUs-crucial semiconductors used in AI training-has constrained cloud service availability for external clients.
Capital expenditure tripled in 2024 to 76.8 billion yuan, from 23.89 billion yuan in 2023, with significant investments allocated to servers and GPUs. Tencent President Martin Lau told reporters on a post-earnings call that capital spending would rise to the "low teens" as a percentage of revenue in 2025, consistent with 2024 levels. "We will continue to increase our AI investments, increasing investment in our proprietary Hunyuan model while expanding our contributions in multimodal and open-source capabilities," Lau said.
Tencent's fourth-quarter capex reached 39 billion yuan, surpassing that of any other listed Chinese tech firm, according to Chief Strategy Officer James Mitchell. He added that the significant increase in 2024 spending positions Tencent well for 2025, though the company could adjust investments upward if demand rises.
Tencent has intensified its AI competition with domestic rivals Alibaba, Baidu, and ByteDance. The company rolled out an upgraded Hunyuan large language model, dubbed Turbo S, designed for faster query responses, and this week unveiled its Hunyuan3D-2.0 tool, capable of converting text and images into 3D graphics.
Tencent has also integrated technology from AI startup DeepSeek, whose efficient models rival Western counterparts at lower development costs. The DeepSeek integration has been deployed across core Tencent products, including WeChat's search feature and its AI assistant Yuanbao.
Yuanbao has emerged as one of China's most downloaded iPhone apps, overtaking DeepSeek's own app. Tencent reported that daily active users of Yuanbao rose more than 20-fold in the February-March period following the integration.
Tencent emphasized the long-term value of its AI investments. "We believe these stepped-up investments will generate ongoing returns via uplifting productivity in our advertising business and longevity of our games, as well as longer term value from accelerated consumer usage of our AI applications and enterprise adoption of our AI services," the company stated.
Tencent's aggressive AI spending strategy mirrors broader trends in China's tech sector. Alibaba announced in February it would invest 380 billion yuan in cloud computing and AI infrastructure over three years, while ByteDance has earmarked over 150 billion yuan for similar initiatives in 2025.
