Gaming accelerates, AI-driven ads boost revenue

Tencent posted a beat on second-quarter income because of an acceleration at its China gaming unit and AI-driven promoting, however its core revenue missed analyst expectations.

The Chinese language tech large additionally reported an increase in capital expenditure within the quarter.

This is how Tencent did within the second quarter versus LSEG estimates:

• Income: 204.78 billion Chinese language yuan ($30.36 billion) versus 202.17 billion yuan anticipated
• Web revenue: 56 billion Chinese language yuan versus 61.82 billion yuan anticipated

Income rose 11% year-on-year whereas revenue was up practically 1%. Tencent mentioned that, stripping out one-time components and sure non-cash gadgets, its revenue was 68.4 billion yuan within the quarter, up 9% versus the identical time final yr.

Tencent mentioned its home video games income got here in at 47.3 billion yuan, up 17% year-on-year, pushed by key titles corresponding to Delta Drive and Valorant PC and Cell. That was sooner than the 6% development the division noticed within the first quarter of this yr, and the identical degree seen within the second quarter of 2025.

Nonetheless, income on the firm’s worldwide recreation income fell 0.8% year-on-year resulting from forex actions, Tencent mentioned. Income was up 4% on a continuing forex foundation.

Tencent is likely one of the world’s largest gaming corporations and each home and worldwide income are watched carefully by traders.

Tencent inventory was down 26% year-to-date at Wednesday’s closing bell in Hong Kong, as the corporate faces intense competitors in China in AI and traders develop jittery about its rising spending. The corporate additionally noticed a slowdown in gaming development within the first quarter of the yr.

The corporate has sought to leverage its huge consumer base of greater than 1.4 billion folks for Weixin and WeChat, China’s hottest messaging app. In June, Tencent began testing an AI assistant referred to as Xiaowei inside WeChat in China. Tencent mentioned on Wednesday that it has began a “small-scale prototype check” for Xiaowei in current weeks.

Final month, Tencent additionally launched Hy3, its newest AI mannequin, which it has since expanded globally.

However Tencent is going through a slew of competitors within the AI house, from established titans like Alibaba to newer entrants like DeepSeek and Moonshot AI, the developer of the Kimi fashions.

Nonetheless, the corporate mentioned capital expenditures for the June quarter rose 65% to 52.8 billion yuan from the earlier quarter, because it continues to ramp up shopping for and constructing computing infrastructure to monetize its AI fashions.

“On the infrastructure degree, we considerably stepped up our procurement of compute, which can allow us to transform utilization of our purposes and fashions into income going ahead,” Tencent mentioned.

One other driver of development within the quarter was Tencent’s advertising companies, aided by AI. Income on the division rose 22% year-over-year to 43.6 billion yuan, supported by “enhancements” to Tencent’s AI-driven advert suggestion mannequin, the corporate mentioned. This function makes use of AI to resolve what advertisements to indicate customers on Tencent’s platforms like WeChat.

General, Tencent posted rising gross revenue in any respect of its predominant divisions, because it seems to fulfill traders that its investments are paying off.