On August 14th during trading, TENCENT (00700.HK) surged 2.39% to HK$600 per share, marking the first time in nearly four years that Tencent's stock price has crossed the HK$600 threshold. Subsequently, Tencent's gains moderated, and as of press time, the stock was trading at HK$594 per share, up 1.37%, with a market capitalization of HK$5.44 trillion.
The previous day, Tencent released its second-quarter 2025 financial results. For the quarter, Tencent recorded revenue of 184.504 billion yuan, representing a 15% year-over-year increase, while operating profit (Non-IFRS) reached 69.248 billion yuan, up 18% year-over-year. The gross margin for the quarter was 57%, an increase of 4 percentage points compared to the same period last year.
The financial report extensively referenced AI initiatives. Tencent's Chairman and CEO Pony Ma stated that the company continues to invest in AI and benefit from it, with evergreen games like "Honor of Kings" and "PUBG Mobile" evolving toward platformization while increasing AI applications.
The report highlighted that multiple business segments are being driven by AI. For instance, marketing services revenue for the quarter reached 35.762 billion yuan, up 20% year-over-year, primarily due to AI-driven advertising platform improvements and enhancements to the WeChat transaction ecosystem. Additionally, enterprise services revenue growth accelerated compared to recent quarters, benefiting from increased enterprise demand for AI-related services, including GPU rental and API token usage.
Tencent has also increased corresponding expenditures for AI development. General and administrative expenses for the quarter totaled 31.9 billion yuan, up 16% year-over-year, mainly due to increased R&D expenses and employee costs supporting AI-related business development. Capital expenditure increased 119% year-over-year to 19.1 billion yuan, primarily for investments in IT infrastructure and data centers.
In gaming, Tencent's international games revenue reached 18.8 billion yuan while domestic games generated 40.4 billion yuan, representing year-over-year growth of 35% and 17% respectively. The new game "Delta Force" achieved over 20 million average daily active users in July, ranking among the top five in the industry for daily active users and top three for revenue.
During the earnings conference call following the financial report release, Tencent management discussed AI, stating that the company focuses on using AI to improve the efficiency of existing businesses such as advertising, gaming, and fintech. Over time, they will further explore AI monetization models. Regarding chips that support AI computing, management indicated that the chip import situation still requires observation. Tencent currently has sufficient chips for training and upgrading existing models, while inference operations have different chip options available. On the software side, the company will continue improvements to enhance inference efficiency, thereby reducing dependence on chip capabilities.
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