Key Takeaways:
- BOCI maintained its Buy rating and HKD655 target price on Tencent
- The broker forecasts 2Q26 revenue growth of 9% YoY and operating profit growth of 6%
- Cloud revenue is accelerating to 23% YoY as AI commercialization gains pace
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BOCI maintains Tencent buy rating at HKD655 on AI progress
BOCI maintained its Buy rating and HKD655 target price on Tencent, forecasting 2Q26 revenue growth of 9%.
"Market recognition and confidence in the company's AI strategy execution progress have strengthened over the past few months," BOCI said in a report dated July 10. The broker highlighted progress across foundation models, products, infrastructure, commercialization and organizational structure.
BOCI estimates 2Q26 total revenue to grow 9% YoY and operating profit to gain 6% YoY, respectively 1% and 6% below market expectations. Online gaming revenue is expected to add 10% YoY, online advertising revenue up 18% YoY, and fintech and business services revenue up 9% YoY. Cloud revenue growth is accelerating to 23% YoY, the fastest segment.
The broker forecasts Tencent will continue accelerating AI investment, reflected in both capital expenditure and daily operating costs, while speeding up AI commercialization particularly in cloud. The HKD655 target price implies upside from current levels, with BOCI's view aligning with a growing consensus that Tencent's AI push is gaining traction. Citi also recently maintained a Buy rating on Tencent, citing strong momentum in its WorkBuddy AI product.
Tencent shares fell 2% on July 10, with short selling volume reaching HKD1.24 billion, or 14.3% of turnover. The stock has been under pressure as broader Hong Kong tech stocks weakened, though the BOCI reaffirmation may provide support near current levels. Tencent competes with Alibaba and Baidu in China's cloud AI market, where cloud revenue growth of 23% outpaces the broader sector. The company's AI investments span foundation model development, enterprise productivity tools, and advertising optimization. Its Hunyuan foundation model powers applications across WeChat, cloud services, and gaming, positioning Tencent to capture AI-driven demand across consumer and enterprise segments.
The maintained rating and target price suggest BOCI sees Tencent's AI monetization as a multi-year growth driver that will increasingly contribute to revenue and margins. Investors will watch the 2Q26 earnings release for updated AI revenue disclosures and margin trends.
This article is for informational purposes only and does not constitute investment advice.
