Tencent Q2 revenue beats as capex jumps 64% above estimates

Tencent Holdings reported second-quarter revenue of RMB 204.79 billion, beating consensus, while capital expenditure surged about 64 percent above estimates.

The spending reflects Tencent's push into AI infrastructure, with the company directing a record amount toward computing capacity, according to its earnings release.

Marketing services revenue rose to RMB 43.57 billion, above the RMB 42.35 billion estimate, the strongest of the company's main segments. Fintech and business services revenue of RMB 60.29 billion and value-added services revenue of RMB 98.41 billion both matched forecasts. Operating profit of RMB 67.28 billion came in slightly below the RMB 67.73 billion consensus. Net profit of RMB 56.02 billion missed the RMB 58.36 billion estimate, dragged by "other net losses" of RMB 480 million against an expected gain of RMB 755.6 million. Selling expenses of RMB 11.87 billion edged below the RMB 11.96 billion forecast.

The revenue beat was led by the marketing services segment, where AI-powered ad targeting and WeChat Channels traffic lifted results. The advertising business has been a key growth pillar for Tencent, with AI tools improving ad conversion efficiency and driving up effective cost per mille, according to the earnings release.

The capex surge, which exceeded the RMB 32.14 billion forecast by about 64 percent, will pressure near-term free cash flow and margins even as it positions Tencent to capture AI and cloud demand across its WeChat ecosystem and HunYuan model. Brokerages have already raised their 2026 capex projections for Tencent, with Daiwa lifting its forecast to RMB 181 billion from RMB 108 billion, Bank of America seeing RMB 185 billion and JPMorgan projecting near RMB 200 billion. The buildout mirrors a broader push by Chinese internet peers racing to secure scarce GPU capacity.

The net profit miss, driven by non-operating items rather than core operations, leaves underlying business profitability intact. Investors will watch the earnings call for guidance on how long the capital-intensive expansion will weigh on margins and free cash flow, and whether AI investments translate into measurable returns for advertising, cloud and enterprise services.

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