Tencent (700) Q1 2025 earnings summary

Executive summary

• Revenue grew 13% year-on-year to RMB180.0 billion for Q1 2025, with strong performance in high-margin segments and robust user growth across core platforms.

• Non-IFRS net profit attributable to equity holders rose 22% year-on-year to RMB61.3 billion; net profit attributable to equity holders was RMB47.8 billion, up 14%.

• Growth was driven by strong domestic and international games, marketing services, and improved gross margins, with AI investments contributing to performance and future opportunities.

• AI investments are expected to create long-term value, with operating leverage from existing businesses helping to absorb increased costs.

• Weixin & WeChat MAU reached 1,402 million, maintaining the #1 position in China.

Financial highlights

• Gross profit increased 20% year-on-year to RMB100.5 billion; gross margin improved to 56%.

• Non-IFRS operating profit was RMB69.3 billion, up 18% year-on-year; operating profit was RMB57.6 billion, up 10%.

• Diluted EPS (non-IFRS) was RMB6.58, up 25% year-on-year, driven by reduced share count from buybacks.

• Free cash flow was RMB47.1 billion, down 9% year-on-year due to increased capex on GPUs and servers.

• Net cash position was RMB90.2 billion as of March 31, 2025, up 17% quarter-on-quarter.

Outlook and guidance

• AI-related investments will continue, with a temporary narrowing of the gap between revenue and operating profit growth expected.

• Long-term value creation anticipated from stepped-up AI projects, leveraging the Weixin ecosystem and expanding AI functionalities.

• Management expects a one- to two-year period for investment to monetization in new AI products.