Tencent Q1 revenue rises 9% as AI products gain traction

Tencent Holdings (00700.HK) reported first-quarter revenue of RMB196.5 billion, up 9% from a year earlier, as AI products and advertising drove growth.

"We started 2026 by making significant initial progress on our new AI products, as well as continuing to utilise AI to grow our existing core businesses," Chairman and CEO Ma Huateng said.

Non-IFRS net profit attributable to equity holders rose 11% to RMB67.9 billion, topping the RMB67.4 billion analysts expected, while revenue came in slightly below the RMB199.0 billion consensus. Gross profit climbed 11% to RMB111.3 billion. Marketing services revenue jumped 20% to RMB38.2 billion, accelerating from 17% growth in the fourth quarter, as an upgraded AI-driven ad recommendation model improved pricing. FinTech and Business Services revenue rose 9% to RMB59.9 billion, with Business Services up 20% on cloud demand.

On an IFRS basis, operating profit rose 17% to RMB67.4 billion, with net profit attributable to equity holders up 21% to RMB58.1 billion and basic earnings per share of RMB6.431. Excluding new AI products, non-IFRS operating profit climbed 17% to RMB84.4 billion, lifting the margin to 43.0% from 39.9% a year earlier.

Capital expenditure rose 16% to RMB31.9 billion as Tencent funds its AI push, with net cash up 63% to RMB146.9 billion. The company repurchased about 12.7 million shares for HKD7.6 billion during the quarter.

Domestic Games revenue rose 6% to RMB45.4 billion, with gross receipts growing at a teens percentage rate, while International Games climbed 13% to RMB18.8 billion on Clash Royale, Wuthering Waves and VALORANT PC. Evergreen titles including Honour of Kings, Peacekeeper Elite and Delta Force hit lifetime highs in quarterly gross receipts. Weixin and WeChat combined monthly active users reached 1,432 million, up 2%.

The Hy3 preview large language model, launched in April, has been the most-used model on OpenRouter since April 28 by token usage, while WorkBuddy ranked as the most popular productivity AI agent service in China by daily active users. AIM+ automated campaign management powered about 30% of total marketing services spending, and time spent on Video Accounts grew over 20% year on year.

The results show Tencent's AI investments are beginning to pay off while core businesses fund the spending. Investors will watch the interim results for continued AI monetization, with 43 of 47 analysts covering the stock rating it buy or strong buy and a consensus 12-month price target of HKD718.

This article is for informational purposes only and does not constitute investment advice.