Tencent Sees Strong Q1 Revenue Growth as Gaming and AI Investments Drive Momentum

Tencent Holdings Ltd., China’s largest technology company by market capitalization, reported a 13% year-on-year rise in revenue for the first quarter of 2025, driven primarily by renewed momentum in its core gaming division and increased advertising revenue.

The company’s performance reflects a broader recovery in the country’s tech sector amid easing regulatory pressure and growing investor interest in artificial intelligence.

For the quarter ending March 31, Tencent generated 180.02 billion Chinese yuan ($25 billion) in revenue, surpassing analyst expectations of 174.63 billion yuan, according to data from LSEG. Net profit rose 14% to 47.8 billion yuan ($6.64 billion), although it fell short of the 52.2 billion yuan projected by analysts.

Tencent’s domestic gaming revenue surged by 24% to 42.9 billion yuan, fueled by the continued popularity of long-standing titles such as Honor of Kings and Peacekeeper Elite, alongside strong performances from newer games like Dungeon & Fighter Mobile. International gaming revenue also grew 23% to 16.6 billion yuan, supported by mobile hits including Brawl Stars and PUBG Mobile.

The company’s ability to maintain strong growth in both domestic and global gaming markets underscores its position as the world’s largest video game publisher. Tencent has also been focusing on developing “evergreen” gaming franchises—titles designed to retain players through updates and sequels—helping stabilize revenues in a maturing market.

Tencent’s advertising business delivered robust growth, with marketing services revenue up 20% year-on-year to 31.9 billion yuan. This performance was attributed to increased advertiser demand across its video content, search capabilities, and WeChat’s Mini Programs—lightweight apps embedded within the popular messaging platform.

WeChat, which now boasts over 1.4 billion monthly active users, remains central to Tencent’s monetization strategy. The platform has evolved into a “super app,” supporting payments, e-commerce, and entertainment, and continues to be a strong driver of both user engagement and ad revenue.

Capital expenditure nearly doubled in the first quarter to 27.5 billion yuan, reflecting Tencent’s push into artificial intelligence. The company is investing in new AI-driven applications and platforms, including its proprietary chatbot Yuanbao and the foundational model Hunyuan. These tools have already contributed to improvements in advertising performance and game optimization, according to Tencent.

Executives emphasized that existing revenue streams, particularly in gaming and advertising, provide the financial cushion needed to support this ramp-up in AI-related spending. Tencent views this as a critical long-term investment as it seeks to compete with both domestic and global tech peers.

While Tencent has demonstrated resilience amid broader economic uncertainty, questions remain about whether the company can sustain its current growth trajectory. Consumer sentiment in China remains mixed, and new gaming titles expected in 2025 may not match the runaway success of DnF Mobile. Still, Tencent has expanded its international footprint, including a $1 billion investment for a 25% stake in a new entity holding some of Ubisoft’s key gaming intellectual properties—signaling its intent to play a greater role in shaping global gaming trends.

Despite missing profit expectations, Tencent’s solid revenue performance and ongoing strategic investments in AI and global gaming suggest a company focused on long-term growth. Analysts note that while AI may not drive significant incremental earnings in the near term, it positions Tencent well in the race to define the next era of digital services and content.

With input from Bloomberg, CNBC, Reuters, and the Wall Street Journal.