Guosen Securities reiterated its "Outperform" rating on Tencent Holdings (00700), highlighting overseas expansion as a clear secondary growth driver for its gaming and cloud businesses. With strategic investments now yielding results, Tencent Cloud operates across 64 availability zones globally. In AI-native gaming, the integration of scenario understanding and large-model technology positions Tencent to lead the "Generative AI + SaaS" transformation. Key insights include:
**Infrastructure + AI: Tencent Cloud’s Late-Mover Advantage in Overseas Markets** Tencent is aggressively expanding overseas cloud infrastructure, committing $150 million in the Middle East (including its first Saudi data center) and $500 million for a third Indonesian data center, alongside a new availability zone in Osaka. Its global footprint spans 22 regions with 3,200+ acceleration nodes.
**Core Strengths: Tech + Localization** Tencent Cloud excels in media services (e.g., live-streaming Thailand’s football matches) and fintech/retail solutions tailored to Southeast Asia. Local IDCs enhance responsiveness, as seen with Indonesia’s GoTo Group, which migrated core services to Tencent Cloud, improving app performance. CP Group (Thailand) also reported operational gains post-migration.
**Market Strategy: Avoiding Price Wars** Focusing on SaaS/PaaS, Tencent targets Chinese enterprises expanding abroad and local internet firms. It prioritizes internal AI chip reserves for model training while leveraging CPUs for inference. Future growth hinges on capturing SaaS demand and the "Generative AI + SaaS" shift.
**Gaming: Engineer Expertise + GaaS Fuel Overseas Growth** Tencent’s Q3 2025 international gaming revenue surged 43% YoY to RMB20.8 billion, driven by Supercell titles and new releases like *Dying Light: Beasts of Prey*. Full-year overseas gaming revenue is projected at RMB75.7 billion (+31% YoY), accounting for 32% of total gaming income.
- **Domestic Teams**: Engineer efficiency enables rapid iterations (e.g., *Delta Force: Operation Hawk* updates 7–8 times annually). - **Acquired Studios**: Western creative teams (e.g., GGG, behind *Path of Exile*) benefit from Tencent’s GaaS support.
**AI’s Role: Cost Savings + Enhanced Gameplay** AI tools are used by 95% of Tencent’s LightSpeed Studio staff, improving 2D/3D asset production (50% efficiency gain; 8% cost reduction) and enabling features like AI coaches for player retention. However, AI-native games remain experimental, requiring breakthroughs in real-time generation and coherence.
**Risks**: Policy changes, macroeconomic headwinds, ad market competition, game launch delays, and AI ethics concerns.
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