Tencent posted a stronger-than-expected 47% profit surge in the third quarter, driven by gains in gaming, advertising, and cloud services, as announced on Wednesday. The Chinese social media and gaming giant reported profit attributable to shareholders rose to 53.23 billion yuan ($7.37 billion) for the period ending September 30, surpassing the LSEG estimate of 46.18 billion yuan. Revenue for the quarter grew by 8% year-over-year to 167.19 billion yuan, though this fell slightly short of analysts’ forecast of 167.82 billion yuan.
Management expressed optimism for next year, projecting substantial free cash flow that could fund dividends and share buybacks. On an earnings call, executives also noted a turnaround in transaction values for October, a sign that government stimulus measures might be influencing consumer activity positively. Tencent’s WeChat Pay, one of China’s leading mobile payment apps, showed growth in transactions after a third-quarter decline, though the company cautioned that China’s broader economic recovery would likely be gradual. Tencent expects sustained growth in the long term as Beijing pursues economic revival policies, including recent measures aimed at boosting market confidence.
Gaming continues to be central to Tencent’s revenue, with domestic gaming sales rising 14% year-on-year to 37.3 billion yuan, while international gaming revenue grew by 11% on a constant currency basis to 14.5 billion yuan. Tencent, which holds a 5% stake in the globally popular Chinese game Black Myth: Wukong, cited strong performance across its gaming portfolio, driven by both established titles and new releases with what it describes as “evergreen potential.” The company plans to focus on sustaining these long-term hits by investing in studios and selectively publishing new games.
Outside of gaming, Tencent’s marketing services revenue — formerly called online advertising — grew by 17% year-on-year to 29.99 billion yuan, making it one of the company’s fastest-growing sectors. Tencent attributes the advertising boost to high demand from brands seeking to reach users through Weixin’s short-video, mini program, and search features. Notably, Weixin’s global user base reached 1.38 billion in the third quarter, up 3% from a year earlier, reflecting continued user engagement. Growth in advertising spend from gaming and e-commerce sectors offset declines in revenue from real estate and food and beverage sectors.
Tencent also emphasized the role of its proprietary artificial intelligence tools in driving business efficiencies, particularly within marketing and cloud services. The company noted on its earnings release that AI deployment has provided “tangible benefits” across products and operations. Tencent remains committed to advancing AI technologies to enhance user and partner experiences, though it acknowledged that demand for cloud services related to AI training is weaker in China compared to the U.S., owing to a smaller enterprise market and fewer AI-focused startups. Within Weixin, AI-enhanced search functions have increased commercial query activity and boosted click-through rates, thanks in part to large language model capabilities.
The company highlighted other advancements in AI-driven advertising, mentioning a recent upgrade in June that uses AI to assist advertisers in creating targeted ads. This feature has contributed to a significant increase in advertiser accounts, now exceeding 200,000, marking a nine-fold rise from last year.
Tencent continues to enhance its short-video and mini-program e-commerce services to compete with ByteDance’s Douyin and other major platforms. The company reported a “high teens” year-over-year growth in gross merchandise value for mini-programs in the third quarter, totaling over 2 trillion yuan. Users have increasingly turned to Weixin’s mini programs for services like food ordering, electric vehicle charging, and medical appointments. The majority of this gross merchandise value comes from service-based transactions rather than physical goods.
