$Tencent Holdings (00700) $It will release its third quarter fiscal 2025 earnings report on November 13. It expects net profit to be 56.89 billion yuan, up 6.9%, and revenue to rise 13% to 189.15 billion yuan.
After the deep integration of AI technology and core business achieved unexpected growth in the second quarter, the continuity of its growth momentum, the deepening of AI commercialization and the room for improvement of profit quality in this quarter have attracted much attention.
The second quarter of fiscal year 2025 is a critical verification period for the implementation of Tencent's "AI + ecosystem" strategy. The total quarterly revenue reached 184.5 billion yuan, a year-on-year increase of 15%, significantly outperforming the industry average growth rate; Profitability continued to increase, gross profit increased by 22% year-on-year to 105 billion yuan, and non-IFRS operating profit was 69.2 billion yuan, a year-on-year increase of 18%. The profit growth rate far exceeded the revenue growth rate, confirming the continuous improvement of operational efficiency.
In terms of game business, quarterly revenue is expected to increase by 16% year-on-year, forming a triple drive of "outbreak of new games + steady old games + overseas acceleration". The new game "Delta Action" performed strongly. In the third quarter, the turnover is estimated to reach 6.5 billion yuan, and the daily active users of the mobile terminal exceeded 25 million. The PC terminal ranks second among the most popular Internet cafes. Its success benefits from the Hunyuan Game AI model's deep empowerment of NPC decision-making and scene generation; Old games such as "Honor of Kings" and "Peace Elite" are generated through AI dynamic tasks, and the user retention rate has increased by about 15%, continuing to contribute stable income. The growth rate of overseas markets is expected to remain above 30%. The AI localization optimization of "PUBG Mobile" and the operational upgrade of Supercell's games will continue to release growth potential.
The growth rate of the advertising business is expected to climb to 19%, and the synergy between video accounts and AI technology is further highlighted. The loading rate of video account advertisements has increased from low single digits to mid-single digits, and the advertising revenue in a single quarter has exceeded 10 billion. Live streaming and small program jump advertisements have formed a "content-conversion" closed loop, and merchants' willingness to launch continues to increase. AI technology realizes full-link optimization. The "Smart Investment AI Creativity" function can automatically generate personalized materials, and the advertising conversion rate increases by more than 20%. The inventory release of superimposed WeChat search AI advertising (the third largest AI search portal in China) has become a new growth pole.
Fintech & Enterprise Services is expected to grow by 11%. Fintech has benefited from the increase in the transaction amount of small program commercial payment and the increase in e-commerce commissions, and its profitability has continued to improve; Enterprise Services (Tencent Cloud) has ushered in an AI inflection point, and the demand for GPU leasing and API token usage has surged. Quarterly revenue is expected to increase by 14% year-on-year, significantly higher than the 8% growth rate in the first half of the year.
The large-scale liquidity and profit margin changes of AI technology are the keys to measuring strategic value. From the perspective of revenue conversion, To-C-side AI applications performed steadily. The monthly active users of "Tencent Yuanbao" increased by 23.6% from 25.025 million month-on-month to 30.921 million. Another AI application "ima" ranked among the forefront of the industry, demonstrating the advantages of ecological traffic conversion; On the To-B side, the open source strategy of Hunyuan large model has attracted a large number of game developers and enterprise customers, and the proportion of AI-related service revenue continues to increase.
In terms of profit margins, the market pays attention to the game between the increase in the proportion of high-margin businesses and the cost of technology investment. Goldman Sachs predicts that non-IFRS earnings per share in the third quarter will increase by 18% year-on-year, significantly higher than the 13% revenue growth rate. The core benefits from the growth of high-margin businesses such as advertising and games and the release of operating leverage. However, the pressure on capital expenditure still exists. Goldman Sachs has raised its capital expenditure in 2025-27 to 350 billion yuan, focusing on chip procurement and AI reasoning scenarios. In the short term, it may suppress profit growth to a certain extent, but in the long term it will support the realization of computing power services.
Selling Iron Eagle Options Strategy
1. Strategy structure
Investors build an Iron Condor option portfolio that contains four options with the same expiration date:
Buy lower strike price Put option (Put): K ₁ = HK $620, premium expenditure HK $0.8;
Sell a higher strike price Put option (Put): K ₂ = HK $630, premium's income is HK $1.4;
Sell a lower strike price Call option (Call): K ₃ = HK $670, and premium earns HK $4.2;
Buy a Call option (Call) with a higher strike price: K ₄ = HK $680, and premium spends HK $2.1.
Investors collect premium by selling the middle two options (630 Put and 670 Call) and limit the risk with the options bought at both ends (620 Put and 680 Call). This portfolio made the most profit when Tencent's share price remained in the HK $630-670 range, belonging toShock neutral strategy。
Initial net income
Net premium income = (income from selling Put + income from selling Call) − (expense from buying Put + expense from buying Call) = (1.4 + 4.2) − (0.8 + 2.1) =HK $2.7/share
Corresponding total revenue = 2.7 × 100 =HK $270/contract。 This amount is when the investor opens a positionMaximum potential profit。
3. Maximum profit
If Tencent's stock price is between HK $630 and HK $670 at expiration, all options will not be exercised, and investors will retain all net premium.
Maximum profit = HK $2.7/share
Corresponding total profit = HK $270/contract.
4. Maximum loss
If Tencent's stock price breaks through the two-end range:
When the stock price ≤ HK $620: put spread = 630 − 620 = HK $10, the option is fully exercised;
When the stock price ≥ HK $680: call spread = 680 − 670 = HK $10, the option is fully exercised.
Maximum one-sided loss = range difference − net income = 10 − 2.7 =HK $7.3/share。 Corresponding total loss = 7.3 × 100 =HK $730/contract。
5. Break-even point
The Iron Eagle strategy has two break-even points:
Lower equilibrium point = K ₂ − Net income = 630 − 2.7 =HK $627.3；
Upper balance point = K ₃ + net income = 670 + 2.7 =HK $672.7。
Hence:
When Tencent's stock price is in the range of HK $627.3 to HK $672.7, investors make a profit;
If the price falls below 627.3 or rises above HK $672.7, it will start to lose money.
6. Risk and return characteristics
Maximum benefit: HK $270/contract;
Maximum loss: HK $730/contract;
Profit-loss ratio: about 1: 2.7;
Applicable scenarios: Investors expect Tencent's stock price to fluctuate in the range of HK $630-670 in the short term, and volatility will decrease;
Strategic positioning: Stable and neutral, limited risk, limited return. It is suitable for the stage when the fluctuations before and after the release of the financial report have been digested by the market and the market is expected to be sideways.
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