Tencent Q2 revenue climbs 11% on AI-driven ad gains, but profit falls short

BEIJING, Aug 12 (Reuters) - Tencent Holdings reported ‌an 11% rise ​in second-quarter ​revenue on Wednesday, driven by strong advertising sales and steady gaming income, as the Chinese technology giant ramps up AI spending.

Net profit, however, rose only 0.7% in ‌the quarter from a year earlier to 56 billion yuan ($8.31 billion), falling short ⁠of analyst expectations of 61.8 billion yuan.

For the three months to the end of June, the Shenzhen-based gaming and internet ‌company reported revenue of 204.8 billion ‌yuan, in line with analyst estimates of 202.2 billion yuan, according to LSEG data.

Investors have been focused on whether Tencent's heavy AI spending is starting to generate returns, or merely weighing ​on margins.

Capital expenditure totalled about 79 billion yuan last year, up from 77 billion yuan in 2024, and the company has signalled AI investment will step up further in the second ⁠half of this year.

Capital expenditure in the June quarter was 52.8 billion yuan, compared with 31.9 billion yuan in the first quarter.

"We're comfortable ​in making significant investments in AI because not only is there substantial upside potential, there's also clear downside protection," Tencent President Martin Lau said on a ​post-earnings call.

He added that even renting out its compute ‌capacity alone would be profitable — a fallback that left management comfortable.

The results come amid an accelerating AI product push by Tencent, which competes with the likes ⁠of ByteDance and Alibaba.

The company has built up a broad portfolio of AI products, including the Yuanbao chatbot and the WorkBuddy office assistant.

Revenue from value-added services, which include Tencent's gaming business, rose 8% to 98.4 billion yuan. Domestic ⁠games revenue grew 17% to 47.3 billion yuan supported by titles including "Honor of Kings" and "Delta Force", while international games ​revenue was down 0.8% to 18.6 billion yuan due to foreign currency movements.

Marketing services revenue climbed 22% to 43.6 billion yuan, as AI upgrades continued to boost advertising and pricing within its Weixin ecosystem, the network that ‌combines messaging, payments and social media, among other services.

Fintech and business services revenue rose 9% to 60.3 billion yuan, with cloud demand for AI-related services ‌remaining a key driver.

In July, Tencent released Hy3, the latest version of its Hunyuan AI model, and last ⁠week opened it to users worldwide. It ‌has also been testing an ​AI assistant inside its WeChat social media app since June.

($1 = 6.7419 Chinese yuan renminbi)

(Reporting by Liam Mo and Eduardo Baptista; Editing by Joe Bavier, Keith Weir and ‌Emelia Sithole-Matarise)

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