Hong Kong Stocks in Focus: Tencent Shares Slide Over 3% After Earnings as AI Spending Boosts Costs, Quarterly Free Cash Flow Turns Negative

Stock News09:36

TENCENT (00700) shares opened more than 3% lower following its earnings release, trading down 3.29% at HK$446.4 as of press time, with a turnover of HK$697 million.

On August 12, TENCENT reported its second-quarter results for the 2026 fiscal year. In the second quarter, the company's revenue reached 204.785 billion yuan, up 11% year-on-year and 4% quarter-on-quarter. Net profit rose 0.7% year-on-year to 56 billion yuan, missing market expectations. Non-IFRS operating profit stood at 75.636 billion yuan, a 9% increase year-on-year, flat compared to the previous quarter. For the first half of the year, TENCENT generated 401.243 billion yuan in revenue, a 10% increase year-on-year, while Non-IFRS operating profit reached 151.263 billion yuan, up 9%.

Notably, upfront investments in AI infrastructure drove free cash flow into negative territory. In the second quarter, TENCENT's capital expenditure hit 52.8 billion yuan, up 65% from 31.9 billion yuan in the first quarter. Free cash flow turned negative to -13.8 billion yuan, marking the first time since 2005 that the company has reported negative free cash flow. The company stated that excluding a 37.6 billion yuan prepayment for computing power, net cash decreased from 146.9 billion yuan in the first quarter to 58.1 billion yuan.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment