Tencent revenue beats on 17% domestic games growth, AI ad boost

Tencent Holdings beat revenue expectations in the quarter ended June 30, 2026, propelled by a rebound in domestic gaming and AI-driven advertising, but core profit fell short of analyst forecasts.

Total revenue rose 11% year-on-year to 179.5 billion yuan. Net profit inched 1% higher to 48.6 billion yuan, missing LSEG estimates. Excluding one-time items, adjusted profit reached 68.4 billion yuan, a 9% gain.

Tencent, one of the world’s largest gaming companies, said domestic games revenue surged 17% to 47.3 billion yuan, driven by Delta Force and Valorant. The growth accelerated from 6% in the first quarter of 2026 and matched the pace set in the second quarter of 2025. International games revenue dipped 0.8% because of currency effects but rose 4% on a constant-currency basis.

Marketing services revenue climbed 22% to 43.6 billion yuan, lifted by AI-based ad recommendation models that optimize placements on WeChat, the dominant messaging app with over 1.4 billion users.

Capital expenditure jumped 65% from the previous quarter to 52.8 billion yuan as Tencent builds compute infrastructure for AI model monetization. The company said the infrastructure ramp-up would help convert application and model usage into future revenue.

In June 2026, Tencent began testing Xiaowei, an AI assistant within WeChat, and by August it had expanded to a small-scale prototype test. The company in July 2026 launched Hy3, its latest AI model, and later made it available globally.

Tencent faces stiff competition in China’s AI arena from Alibaba, DeepSeek, and Moonshot AI, the maker of the Kimi models.

Despite the revenue beat, Tencent’s stock has fallen 26% year-to-date as of the August 12 close in Hong Kong, reflecting concerns about rising spending and earlier gaming slowdowns.

Gross profit rose across all main divisions, signaling that investments are beginning to pay off.