TMTPOST -- Tencent Holdings Ltd. on Thursday posted the stronger-than-expected top and bottom line again as the efforts of China’s largest company by market capitalization to deploy advanced artificial intelligence (AI) technology in its core businesses are paid off. 

Credit：Tencent

Tencent posted total revenue of RMB192.87 billion ($27.2 billion) for the quarter ended September 30, beating an average estimate of RMB188.8 billion, according to Bloomberg. The revenue shattered the company’s quarterly record for the second straight quarter and maintained a double-digit growth for four quarters in a row. With a 15% year-over-year (YoY) rise, the top line kept the fastest pace since the third quarter of 2021 that was set three months ago, whereas analysts expected the company would deliver a 12.9% YoY increase.

The bottom line of Chinese social media and video game giant also accelerated, instead of slowing down. On an IFRS basis, the profit attributable to equity holders of the company, or net income, soared 19% YoY to RMB63.13 billion from July to September, suggesting a massive beat since analysts anticipated net income would add around 5% following a 17% YoY increase for the previous quarter. Diluted earnings per share (EPS) were RMB6.779 with a 20% YoY increase, the same yearly gain as the second quarter.

Tencent attributed the stellar growth to its heavy investment in AI technology and leverage of AI tools to boost major businesses. The solid revenue and earnings growth reflected “healthy trends across games, marketing services, and fintech and business services,” according to Tencent Chairman and CEO Pony Ma, or Ma Huateng. 

“Our strategic investments in AI are benefitting us in business areas such as ad targeting and game engagement, as well as in efficiency enhancement areas such as coding, and game and video production,” said Ma in a statement.

Tencent said the third quarter saw it enhanced its large language model (LLM) HunYuan’s complex reasoning capabilities, especially in coding, mathematics, and science. HunYuan image generation model is ranked first globally among text-to-image models by LMArena. 

“We are upgrading the team and architecture of our HunYuan foundation model, whose image and 3D generation models are now industry leading,” said Ma. “As HunYuan’s capabilities continue to improve, our investment in growing Yuanbao adoption, and our effort in developing agentic AI capabilities within Weixin, will gain further traction.”

Tencent’s bread-and-butter gaming delivered a double-digit YoY growth for the fourth consecutive quarter. VAS (value-added services), including game and social network business, raked in RMB95.9 billion with a 16% YoY rise, the same increase as the June quarter.  

Domestic Games brought RMB42.8 billion, representing a YoY rise of 15% after a 17% increase for the preceding quarter. Tencent said it primarily reflected contributions from recently released games such as Delta Force, growth in revenues from evergreen games such as Honour of Kings and Peacekeeper Elite, and the expansion of VALORANT from PC to mobile. Revenue from

Revenue from International Games grew 43% YoY to RMB20.8 billion, refreshing the quarterly record set in the second quarter with a 35% YoY increase. Acceleration of International Games was mainly due to  higher revenues from Supercell’s games, recognizing revenue upfront on copy sales of new game release, and to consolidation of recently acquired studios. Social Networks revenues gained 5% YoY to RMB32.3 billion, driven by growth in Video Accounts live streaming revenue, music subscription revenue and Mini Games platform service fees.

Revenues from Marketing Services advanced to RMB36.2 billion for the second quarter with a 21% YoY increase, compared with a growth rate of 20% for the previous two quarters. The growth was primarily due to higher ad impressions, benefiting from increased user engagement and ad load, coupled with higher eCPMs, driven by AI-powered ad targeting. Advertising spending increased across all major industry categories during the third quarter.

Revenues from FinTech and Business Services popped 10% YoY to RMB58.2 billion, the same YoY increase for the second quarter. The revenue growth grew at a high single-digit percentage rate YoY, thanks to higher revenues from commercial payment activities and consumer loan services. Business Services revenues grew at a teens percentage rate year-on-year, reflecting higher cloud services revenues, including those driven by increased enterprise customer demand for AI-related services, and higher eCommerce technology service fees arising from growth in Mini Shops gross merchandise value, or GMV.

Tencent’s results still came ahead of most estimates despite the market expecting a strong performance for the quarter, positioning Tencent as “the most ‘reputable’ company with stable/consistent performance”, commented Citi analysts. “The only possible disappointment if any would be the capex,” analysts led by Alicia Yap said in a note.

Tencent’s capital expenditure shed 24% YoY to RMB13.0 billion after the Capex surged 119% YoY to RMB19.1 billion three months earlier. That marked a 31.9% sequntial decrese in Capex during a period marked by geopolitical volatility and economic uncertainty.