(Bloomberg) — Tencent Holdings Ltd. outlined plans to sharply raise spending on AI infrastructure after posting its fastest pace of revenue growth since 2023, showing that China’s most beneficial company is intent on keeping pace with rivals within the post-DeepSeek era.
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Revenue rose a better-than-projected 11% to 172.5 billion yuan ($23.8 billion) for the three months ended December, while net income almost doubled. The corporate also unveiled plans to purchase back at the least HK$80 billion value of shares and proposed a 32% hike in its annual dividend for 2025. Shares in Prosus NV, a significant shareholder, climbed greater than 2% in Europe.
Tencent sketched out a more measured approach to artificial intelligence than arch-foe Alibaba Group Holding Ltd., which last month declared it was going all-in on AI development. Billionaire founder Pony Ma described how Tencent made the “careful consideration” to depend on each in-house and open-sourced models — in much the identical way it publishes each its own and third-party games.
Tencent intends to commercialize AI by beefing up services resembling promoting and WeChat, while spending on research to maintain pace with Alibaba and DeepSeek, whose emergence in January galvanized global AI development. Tencent plans to devote a low-teens percentage of its 2025 revenue toward capital expenditures, including on AI infrastructure — greater than $10 billion, based on analysts’ projected sales this yr.
“AI is definitely in a really early stage, so it’s really hard to discuss what the eventual state would appear to be,” President Martin Lau told analysts on a post-results briefing. But each of Tencent’s consumer-facing applications “will proceed to evolve right into a very useful and much more powerful product to users.”
Tencent ramped up its purchases of AI chips in 2024’s final quarter to serve increased demand, which should translate into faster cloud revenue growth, executives said. The corporate is working around US restrictions on probably the most powerful Nvidia Corp. semiconductors. Chief Strategy Officer James Mitchell said DeepSeek nevertheless has demonstrated the way it’s possible to attain breakthroughs for less, and Tencent itself was prioritizing “high-value” use cases.
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Tencent is amongst the key Chinese tech names to report this week, wrapping up a closely watched earnings season for a trillion-dollar sector that’s rounding a corner.
President Xi Jinping last month met with distinguished entrepreneurs including Tencent chief Ma and Alibaba co-founder Jack Ma, signaling Beijing’s softening stance toward a personal sector it assailed over three years. Also in attendance were a recent generation of founders representing industries like chipmaking, electric vehicles and AI, echoing Xi’s priorities during a tech face-off against the US.
That symposium got here just weeks after Hangzhou-based DeepSeek launched a model that rivals OpenAI’s while needing much less computing resources.
The Chinese startup’s R1 has triggered soul-searching amongst Chinese tech giants, who’re now ramping up the discharge of comparable model upgrades or raising investments in AI infrastructure. Alibaba made one of the dramatic moves by pledging to spend greater than $50 billion on its AI and cloud computing networks over the following three years. The e-commerce pioneer’s CEO declared that artificial general intelligence — human-like AI capability — is now its “primary objective.”
Tencent gained roughly 30% or $140 billion in market valuation up to now this yr, helped by a broader Chinese tech rally induced by the rise of DeepSeek. But that lags behind a 70%-plus jump in shares of arch-rival Alibaba, whose Qwen model underpins considered one of the country’s more popular AI services.
What Bloomberg Intelligence Says
Tencent’s unchanged concentrate on leveraging artificial intelligence internally, especially in ads and video games, stands the next likelihood of generating a direct payback than its peers. Tencent’s 4Q outlook statement lacked the Big Bang approach to AI seen from Alibaba, which is more focused on cloud computing and fewer certain long-term opportunities in artificial general intelligence (AGI). Tencent confirmed it had reorganized its AI teams to sharpen its focus.
– Robert Lea and Jasmine Lyu, analyst
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Tencent is playing catch-up. It integrated DeepSeek’s open-sourced models into services including WeChat search and its chatbot Yuanbao, which briefly became the country’s most downloaded free app on iPhone. With Peacekeeper Elite, considered one of Tencent’s two biggest gaming titles, DeepSeek forms the muse of a recent virtual assistant that teaches players the right way to shoot. On Tuesday, it released AI services that turn text or images into 3D visuals and graphics, potentially streamlining the usually lengthy and dear studio development process.
“Tencent has historically caught up at a later stage, narrowing the market share gap and even surpassing the primary mover, backed by its unique WeChat ecosystem,” Goldman Sachs analysts including Ronald Keung wrote in a note before the outcomes. Super-apps like WeChat and ByteDance Ltd.’s Douyin are best positioned to tap into AI application or agent opportunities, they said.
With a billion-plus users, WeChat stays Tencent’s most dependable asset because it takes on a much bigger monetization role in areas from promoting to mini-games and online commerce. It also reflects the economic environment via services like ride-hailing and meal delivery — though the fintech division that includes that payments network is now Tencent’s most stagnant unit.
Tencent scored last yr with game releases from Nexon Co.’s Dungeon & Fighter Mobile to its own PC shooter Delta Force — titles it intends to grow into so-called evergreen franchises that may generate regular money.
But there’s no guarantee it may repeat that feat in 2025. Tencent joined global peers in slashing development jobs while realigning its concentrate on fewer key titles. Its pipeline stays strong with a handful of likely hits including Honor of Kings: World, Monster Hunter Outlanders, and the China release of Goddess of Victory: Nikke.
–With assistance from Vlad Savov, Claire Che, Luz Ding, Debby Wu and Charlotte Yang.
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