Tencent (700) Q1 2026 earnings summary

Executive summary

• Revenue for Q1 2026 rose 9% year-over-year to RMB196.5 billion, with operating profit excluding new AI products up 17% and non-IFRS net profit attributable to equity holders up 11% to RMB67.9 billion.

• Significant progress in AI, including the launch of Hunyuan 3 (Hy3) Preview, now a leading reasoning model in China and top-ranked on OpenRouter by token usage.

• Productivity AI agents like WorkBuddy and CodeBuddy are gaining rapid adoption and high retention among users.

• Core businesses, especially evergreen games and cloud services, delivered robust engagement, revenue, and cash flow.

• Diluted EPS (non-IFRS) grew 12% year-over-year to RMB7.364, aided by share buybacks.

Financial highlights

• Gross profit reached RMB111.3 billion, up 11% year-over-year, with gross margin improving to 57%.

• Non-IFRS operating profit was RMB75.6 billion, up 9% year-over-year; excluding new AI products, it was RMB84.4 billion, up 17%.

• Free cash flow was RMB56.7 billion, up 20% year-over-year.

• Net cash position at quarter end was RMB146.9 billion, up 37% quarter-on-quarter and 63% year-over-year.

• Adjusted EBITDA reached RMB89.6 billion, with a margin of 46%.

Outlook and guidance

• Substantial increase in AI-related CapEx expected in the second half of 2026 as more China-designed ASICs become available.

• Focus remains on scaling AI models and expanding agentic AI use cases, with ongoing investment in infrastructure and talent.

• Monetization of AI products is expected to be gradual, with business-oriented revenues materializing faster than consumer subscriptions.

• Management anticipates further expansion of AI-driven products and services, leveraging strong cash flow from core businesses.