Tencent Could Post Slowest Net Profit Growth in Almost Two Years in Second Quarter -- Earnings Preview

Dow Jones08-11

By Sherry Qin

Tencent Holdings is scheduled to report second-quarter results on Wednesday. Here's what you need to know:

NET PROFIT FORECAST: The Chinese videogame and social-media company's quarterly net profit likely rose 7.3% from the same period last year to 51.095 billion yuan, equivalent to $7.11 billion, according to the consensus estimate from a FactSet poll of 15 analysts. The quarter could mark its slowest net profit growth in almost two years.

REVENUE FORECAST: Second-quarter revenue likely rose 10.9% on year to 178.69 billion yuan. A stable performance of its legacy games and strong deferred revenue from the first quarter propped up its gaming business.

Tencent's shares have risen 34% so far this year after edging up 1.2% in the second quarter. Although tariff headwinds weighed on Hong Kong stocks in the second quarter, Tencent's shares have been relatively resilient as its businesses are shielded from geopolitical risks. Meanwhile, investor sentiment has been buoyed by China's steady approval of games over the past year and the tech giant's AI push.

WHAT TO WATCH:

-- Investors should pay attention to management's updates on Tencent's AI model and new features of its AI chatbot Yuanbao. After Nvidia resumed its H20 chip sales in China last month, China's leading AI and cloud players, like Tencent, should be able to expand their capex plans, CGS International analysts said in a note.

-- Analysts reckon that the gap between Tencent's profit and revenue growth could narrow from the second quarter due to its rising AI spending. However, Barclays analysts believe "these investments are absolutely necessary to stay ahead in the AI race in China."

-- A high base for "Dungeon and Fighter Mobile" last year could drive a gradual deceleration of domestic game growth from the second quarter. However, robust performance from "Delta Force" could buffer growth alongside continued strong contributions from its legacy games.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

August 11, 2025 00:33 ET (04:33 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.

At the request of the copyright holder, you need to log in to view this content

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