Tencent’s Profit Surges by 90% on AI and Gaming Growth

Tencent posted a strong fourth-quarter performance, with profits surging 90%, driven by growth in gaming and advertising revenue. Domestic games revenue in China jumped 23% year-on-year to 33.2 billion yuan, fueled by a low base from the previous year and strong performance from games like Honour of Kings and Peacekeeper Elite. 

International games revenue also increased 15% to 16 billion yuan, reflecting Tencent’s focus on expanding its gaming footprint abroad amid slower domestic growth. Advertising revenue grew 17% to 35 billion yuan, supported by the monetization of WeChat's 1.38 billion monthly users and improvements in AI-powered ad recommendations.

AI is emerging as a major revenue driver for Tencent, with AI cloud revenue doubling year-on-year in 2024. The company’s fintech and business service division, which includes cloud computing, grew 3% to 56.1 billion yuan in the fourth quarter.

Capital expenditure more than tripled in 2024 to 76.8 billion yuan from 23.89 billion in 2023, with spending focused on AI infrastructure like servers and GPUs. 

What Does This Mean for Me?

Tencent has reorganized its AI teams to enhance product innovation and deepen model research, with expectations of long-term value through increased user engagement and enterprise AI adoption. 

Tencent remains well-positioned to capitalize on AI and gaming growth despite rising competition from Alibaba and Baidu, which have launched their own advanced AI models. Investors in Chinese stocks would do well to monitor the developing tech landscape in that country.