(Bloomberg) — In a significant move, Tencent Holdings Ltd. is set to substantially boost its AI infrastructure spending, following a robust revenue upturn, marking the most rapid growth since 2023. This strategic shift underscores China’s leading firm’s determination to remain competitive in the evolving landscape of AI technologies.
In the latest financial quarter ending in December, Tencent saw an impressive 11% increase in revenue, reaching 172.5 billion yuan ($23.8 billion). The company’s net income saw an almost twofold rise, coupled with announcements of a share buyback plan of at least HK$80 billion and a proposed 32% increase in the annual dividend slated for 2025. The news sent shares of key shareholder Prosus NV up by over 2% in European markets.
Contrasting sharply with its rival Alibaba Group Holding Ltd., which recently committed heavily to AI development, Tencent is taking a more nuanced approach. Billionaire founder Pony Ma discussed how the company plans to balance its reliance between internally developed and open-source models, much like it does with its gaming ventures featuring both in-house and third-party offerings.
Tencent’s AI strategy includes enhancing its services — from advertising to WeChat — while investing in cutting-edge research to stand toe-to-toe with key players like Alibaba and DeepSeek. Anticipating AI to play a significant role, the company plans to allocate a low-teens percentage of its projected 2025 revenue towards capital expenditures, including more than $10 billion directed at AI infrastructure, according to analysts’ predictions for this year’s sales.
“AI is still in its early stages, making it difficult to predict its ultimate form,” Tencent’s President Martin Lau explained to analysts during a briefing. Yet, he emphasized that the company’s wide range of consumer apps will evolve into highly valuable tools for users over time.
In the last quarter of 2024, Tencent ramped up its acquisition of AI chips to meet the soaring demand, setting the stage for accelerated growth in its cloud services. The company is strategizing around U.S. restrictions affecting top-tier Nvidia Corp. semiconductors. DeepSeek, however, has shown that significant advances are possible with less, a philosophy Tencent is adopting with its focus on “high-value” applications, as noted by Chief Strategy Officer James Mitchell.
Tencent is among the top Chinese tech companies reporting this week, wrapping up a critical earnings period for a trillion-dollar sector that’s charting a new course. Recently, President Xi Jinping met with key business figures like Tencent’s Ma and Alibaba’s Jack Ma, suggesting a more supportive stance from Beijing towards private enterprise after years of scrutiny. This meeting included a new wave of innovators from sectors such as chipmaking, electric vehicles, and AI, mirroring Beijing’s high-tech ambitions.
This gathering followed the emergence of DeepSeek’s model, which rivals OpenAI but requires significantly less computing power. DeepSeek’s rise is prompting Chinese tech giants to introspect and accelerate their efforts in AI system development. Alibaba, for instance, dramatically pledged over $50 billion toward AI and cloud technology advancements over the next few years, with its CEO identifying artificial general intelligence as a pivotal goal.
Tencent’s market value has surged by about 30%, equivalent to a $140 billion increase, bolstered by a broader tech rally in China fueled by DeepSeek’s trends. However, this growth is modest compared to a more than 70% rise in Alibaba’s shares, powered by its successful Qwen model.
According to Bloomberg Intelligence, Tencent’s continued internal focus on AI applications, particularly in advertisements and gaming, promises more immediate returns than its competitors. Unlike Alibaba’s aggressive AI strategy focused on cloud computing, Tencent’s outlook is more reserved yet strategically aligned, as proven by its reorganization of AI teams.
Historically, Tencent has been adept at closing gaps, often outperforming initial market leaders, thanks to the robust WeChat ecosystem. Analysts at Goldman Sachs suggest that super-apps like WeChat and Douyin, from ByteDance Ltd., are well-positioned to capitalize on AI opportunities.
With over a billion users, WeChat remains Tencent’s cornerstone, expanding its role in monetization across ads, mini-games, and e-commerce, reflecting wider economic trends through services like ride-hailing and meal delivery. Nonetheless, the fintech aspect of Tencent, including its payments framework, is currently its slowest-growing sector.
In gaming, Tencent scored last year with successful launches such as Dungeon & Fighter Mobile from Nexon Co. and its own PC shooter, Delta Force. These titles aim to become enduring franchises, consistently generating revenue. However, success is not assured for 2025, as Tencent, like many of its peers, trims development roles, honing in on key projects. The future is bright, with anticipated hits like Honor of Kings: World, Monster Hunter Outlanders, and China’s release of Goddess of Victory: Nikke poised on the horizon.
The article concludes by noting assistance from experts like Vlad Savov, Claire Che, Luz Ding, Debby Wu, and Charlotte Yang, providing critical insights into Tencent’s financial trajectory and strategic direction.
