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Tencent Holdings Limited (HK:0700)
:0700
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Tencent Holdings (0700) AI Stock Analysis

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HK:0700

Tencent Holdings

(OTC:0700)

Rating:79Outperform
Price Target:
HK$594.00
▲(5.88% Upside)
Tencent Holdings' overall stock score is driven by strong financial performance and positive earnings call highlights. The company's profitability and growth, along with strategic investments in AI, are major strengths. Technical analysis shows bullish trends, though the stock may be nearing overbought levels. Valuation metrics suggest the stock could be overvalued, presenting a potential risk.
Positive Factors
AI and advertising
AI-powered smart advertising is a key growth catalyst, with an estimated 19% year-over-year growth in online marketing revenue due to improved targeting precision.
AI cloud revenue
Tencent's AI cloud revenue doubled year-over-year, with significant investment in AI initiatives, supporting growth in its advertising segment through higher user engagement and ongoing AI upgrades.
Online games revenue
Encouraging online games grossing fueled by evergreen titles with a forecast of 18.4% year-over-year growth in online games revenue.
Negative Factors
Acquisition concerns
Tencent is reportedly considering an acquisition of South Korean video game developer Nexon, which could expand its global reach and provide more monetization opportunities.
Cloud growth
Cloud growth was slow due to prioritizing GPU for internal use, which may affect short-term revenue growth.
Market exposure
Tencent is less exposed to any short-term drag due to stronger H20 inventory and increased focus on external cloud demand.

Tencent Holdings (0700) vs. iShares MSCI Hong Kong ETF (EWH)

Tencent Holdings Business Overview & Revenue Model

Company DescriptionTencent Holdings Limited is a Chinese multinational conglomerate holding company, primarily involved in various internet-related services and products, entertainment, AI, and technology. It is one of the world's largest technology companies, focusing on social media, gaming, and digital content. Tencent is well-known for its innovative platforms like WeChat and QQ, which dominate social messaging in China. It also has a significant presence in online gaming, with popular titles such as Honor of Kings and investment stakes in global gaming companies like Epic Games and Riot Games.
How the Company Makes MoneyTencent makes money through several key revenue streams: social network services, online advertising, fintech and business services, and online gaming. The company generates significant revenue from its dominant messaging platforms WeChat and QQ through advertising and value-added services. Online gaming is a major contributor to Tencent's revenue, with income derived from both domestic and international markets through game sales, in-game purchases, and licensing. Additionally, Tencent has a growing fintech sector with its WeChat Pay and QQ Wallet services, earning transaction fees and financial services income. The company's cloud services and other tech solutions also contribute to its earnings, alongside strategic investments and partnerships in various industries, including entertainment, e-commerce, and artificial intelligence.

Tencent Holdings Earnings Call Summary

Earnings Call Date:May 14, 2025
(Q1-2025)
|
% Change Since: 11.84%|
Next Earnings Date:Aug 13, 2025
Earnings Call Sentiment Positive
Tencent reported strong financial growth driven by record user engagement and successful expansion of its gaming segment. While AI and cloud advancements are promising, increased investments in AI have temporarily narrowed the gap between revenue and profit growth. Regulatory uncertainties related to high-end GPUs and fintech challenges remain concerns.
Q1-2025 Updates
Positive Updates
Strong Financial Performance
Total revenue was RMB180 billion, up 13% year-on-year. Gross profit was RMB100 billion, up 20% year-on-year. Non-IFRS operating profit was RMB69 billion, up 18% year-on-year. Non-IFRS net profit attributable to equity holders was RMB61 billion, up 22% year-on-year.
Record User Engagement
Combined MAU of Weixin and WeChat grew year-on-year and quarter-on-quarter to 1.4 billion.
Gaming Segment Growth
Domestic games revenue grew by 24% year-on-year, driven by flagship games like Honor of Kings and Peacekeeper Elite. Delta Force became the highest ranked mobile game by DAU released in China in the last three years.
AI and Cloud Advancements
AI capabilities contributed to business segments such as performance advertising and evergreen games. Tencent Cloud's audio and video solutions ranked first by revenue for the seventh consecutive year in China.
Advertising Revenue Growth
Marketing services revenue grew 20% year-on-year to RMB32 billion, benefiting from higher user engagement and ongoing AI upgrades.
Negative Updates
Temporary Cost Pressures from AI Investments
Increased spending on AI-related investments led to a temporary smaller gap between revenue and operating profit growth rates.
Challenges in Fintech Services
Total commercial payment volume declined slightly year-on-year in the first quarter but improved in April. Fintech services revenue grew by a low single-digit percentage year-on-year.
Regulatory Uncertainty for High-End GPU
Recent US licensing requirements for high-end GPUs could impact AI development, CapEx, and product launches.
Company Guidance
In Tencent's 2025 first quarter announcement, the company reported a strong financial performance with total revenue increasing by 13% year-on-year to RMB180 billion. Gross profit reached RMB100 billion, marking a 20% year-on-year growth. The non-IFRS operating profit rose by 18% to RMB69 billion, while the non-IFRS net profit attributable to equity holders was RMB61 billion, up 22% year-on-year. The company's AI investments have begun to contribute significantly, particularly in performance advertising and gaming. The combined monthly active users (MAU) of Weixin and WeChat grew to 1.4 billion. Value-added services (VAS) revenue increased by 17% to RMB92 billion, with domestic and international games contributing notably. The fintech and business services segment saw a revenue increase of 30%, reaching RMB55 billion, and the gross profit for this segment rose by 16% to RMB28 billion. Tencent continues to invest in AI to enhance its offerings, expecting these investments to generate substantial long-term returns.

Tencent Holdings Financial Statement Overview

Summary
Tencent Holdings presents a robust financial performance with strong profitability and stable growth. The company maintains a healthy balance sheet with low leverage and efficient equity utilization. Cash flows are strong, though there is a slight decline in free cash flow growth. Overall, Tencent is well-positioned in the industry with a solid financial foundation and growth trajectory.
Income Statement
85
Very Positive
Tencent Holdings demonstrates strong profitability with a robust gross profit margin of 53.7% and a net profit margin of 29.4% for the TTM. The revenue growth rate from the previous year to TTM is 3.1%, indicating steady growth. The EBIT margin of 31.3% and EBITDA margin of 36.2% reflect efficient operations and cost management.
Balance Sheet
80
Positive
The balance sheet is solid with a debt-to-equity ratio of 0.39, indicating a conservative leverage approach. ROE stands at 19.2%, showcasing effective use of equity to generate profits. An equity ratio of 54.2% highlights a strong equity base, contributing to financial stability.
Cash Flow
78
Positive
Cash flow analysis reveals a stable financial position with a free cash flow to net income ratio of 0.89, reflecting efficient cash generation relative to earnings. The operating cash flow to net income ratio is 1.31, indicating strong operational cash generation. However, the free cash flow growth rate shows a slight decline of 1.8% from the previous year.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue660.26B609.01B554.55B560.12B482.06B
Gross Profit349.25B293.11B238.75B245.94B221.53B
EBITDA310.14B183.94B134.30B313.65B238.25B
Net Income194.07B115.22B188.24B224.82B159.85B
Balance Sheet
Total Assets1.78T1.58T1.58T1.61T1.33T
Cash, Cash Equivalents and Short-Term Investments343.16B379.15B289.48B262.35B227.88B
Total Debt357.94B371.24B359.14B323.48B262.46B
Total Liabilities727.10B703.57B795.27B735.67B555.38B
Stockholders Equity973.55B808.59B721.39B806.30B703.98B
Cash Flow
Free Cash Flow181.76B174.56B95.24B113.02B127.52B
Operating Cash Flow258.52B221.96B146.09B175.19B194.12B
Investing Cash Flow-122.19B-125.16B-104.87B-178.55B-181.96B
Financing Cash Flow-176.49B-82.57B-59.95B21.62B13.65B

Tencent Holdings Technical Analysis

Technical Analysis Sentiment
Positive
Last Price561.00
Price Trends
50DMA
520.52
Positive
100DMA
505.54
Positive
200DMA
464.20
Positive
Market Momentum
MACD
13.46
Negative
RSI
63.98
Neutral
STOCH
84.97
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:0700, the sentiment is Positive. The current price of 561 is above the 20-day moving average (MA) of 541.35, above the 50-day MA of 520.52, and above the 200-day MA of 464.20, indicating a bullish trend. The MACD of 13.46 indicates Negative momentum. The RSI at 63.98 is Neutral, neither overbought nor oversold. The STOCH value of 84.97 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HK:0700.

Tencent Holdings Peers Comparison

Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$5.09T23.9221.25%0.80%8.88%54.27%
78
Outperform
HK$342.74B20.7325.82%9.42%33.34%
74
Outperform
HK$240.23B8.729.84%-1.73%32.35%
74
Outperform
HK$18.82B7.3110.79%8.35%0.43%21.65%
66
Neutral
$31.43B27.55-1.14%13.74%-125.64%
60
Neutral
$43.32B5.10-7.47%4.18%2.51%-40.18%
57
Neutral
HK$8.60B43.402.01%4.30%-15.71%-80.38%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
HK:0700
Tencent Holdings
561.00
185.68
49.47%
HK:1896
Maoyan Entertainment
7.44
0.62
9.09%
HK:1024
Kuaishou Technology Class B
78.90
33.85
75.14%
HK:9888
Baidu, Inc. Class A
85.80
3.20
3.87%
HK:9898
Weibo Corp Class A
77.50
20.90
36.93%
HK:0772
China Literature
31.92
7.17
28.97%

Tencent Holdings Corporate Events

Tencent Strengthens Governance with New Nomination Committee Appointment
Jun 26, 2025

Tencent Holdings Limited has announced the appointment of Professor Ke Yang as a member of its Nomination Committee, effective from June 27, 2025. This strategic appointment is expected to enhance the governance structure of Tencent, potentially impacting its decision-making processes and reinforcing its commitment to strong corporate governance practices.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Holdings Announces Board Restructuring
Jun 26, 2025

Tencent Holdings Limited has announced changes to its board of directors, effective from June 27, 2025. The board will consist of Executive Director Ma Huateng, several Non-Executive Directors, and Independent Non-Executive Directors. The company has also updated the membership of its five board committees, with Ke Yang being appointed as a member of the Nomination Committee. These changes are expected to influence Tencent’s governance and strategic decision-making, potentially impacting its operations and market positioning.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Holdings Enhances Governance with New Audit Committee
Jun 26, 2025

Tencent Holdings Limited has established an Audit Committee as part of its corporate governance structure. This committee, composed of non-executive directors, is tasked with overseeing the company’s financial reporting processes, audit activities, and ensuring compliance with applicable standards. The committee is authorized to investigate activities within its scope, seek information from employees, and obtain external professional advice if necessary. This move is expected to enhance transparency and accountability, strengthening Tencent’s industry positioning and reassuring stakeholders of its commitment to robust governance practices.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Establishes Nomination Committee to Enhance Board Governance
Jun 26, 2025

Tencent Holdings Limited has established a Nomination Committee to ensure fair and transparent nominations for its Board of Directors. The committee, comprising a majority of independent non-executive directors, is tasked with reviewing the board’s structure and diversity, identifying qualified individuals for board membership, and making recommendations on director appointments and succession planning. This move is expected to enhance corporate governance and align the board’s composition with the company’s strategic goals.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Holdings Schedules Board Meeting for Interim Results and Dividend Consideration
Jun 23, 2025

Tencent Holdings Limited has announced that its board of directors will meet on August 13, 2025, to approve the company’s unaudited interim results for the first half of the year ending June 30, 2025. This meeting will also consider the payment of an interim dividend, which could have implications for stakeholders and reflect the company’s financial health and strategic direction.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Holdings Approves Key Resolutions at 2025 AGM
May 14, 2025

Tencent Holdings Limited held its 2025 Annual General Meeting on May 14, where all proposed resolutions were approved by shareholders. Key resolutions included the approval of financial statements, the declaration of a final dividend, the re-election of directors, and the granting of mandates to issue and repurchase shares. The approval of these resolutions reflects shareholder confidence in the company’s strategic direction and governance, potentially impacting its market operations and shareholder value positively.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Tencent Reports Robust Q1 2025 Results with AI-Driven Growth
May 14, 2025

Tencent Holdings reported strong financial results for the first quarter of 2025, with significant year-on-year growth in revenues and profits. The company highlighted its strategic investments in AI technologies, which have already started contributing to its business operations, particularly in performance advertising and gaming. Tencent’s initiatives, such as integrating AI features into Weixin, aim to enhance user experience and productivity, while its focus on AI-driven innovations is expected to generate long-term value for stakeholders.

The most recent analyst rating on (HK:0700) stock is a Buy with a HK$450.00 price target. To see the full list of analyst forecasts on Tencent Holdings stock, see the HK:0700 Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 19, 2025