TMTPOST --   Tencent Holdings Ltd. on Thursday   posted   the   stronger-than-expected top   and   bottom line   again   as   the efforts   of   China ’ s largest   company by market   capitalization   to   deploy   advanced   artificial intelligence ( AI )   technology   in its   core businesses   are   paid off.  

Credit：Tencent

Tencent posted total revenue of RMB192.87   billion   ( $27.2   billion )   for   the quarter   ended September   30, beating   an   average estimate   of   RMB188.8   billion, according to Bloomberg.   The revenue shattered the company ’ s quarterly   record   for the second straight   quarter and maintained a double-digit   growth for four   quarters in   a row. With a 15%   year-over-year ( YoY )   rise, the top   line   kept the   fastest pace since the third quarter of 2021   that was set   three months ago, whereas   analysts   expected   the company   would deliver a 12.9%   YoY increase.

The bottom line of Chinese social media and video game giant   also   accelerated,   instead of   slowing   down.   On an IFRS basis, the profit attributable to equity holders of the company, or net income, soared 19% YoY to RMB63.13   billion   from   July   to September, suggesting   a massive beat   since   analysts   anticipated   net   income would add around 5%   following a 17% YoY increase for the previous quarter. Diluted earnings per share ( EPS ) were RMB6.779   with a   20% YoY increase, the same   yearly gain as   the second   quarter.

Tencent attributed   the   stellar growth   to   its heavy investment in   AI technology   and leverage of AI   tools to boost   major businesses. The solid revenue and earnings   growth reflected   "healthy trends across games, marketing services, and fintech and business services,"   according to   Tencent Chairman and CEO Pony Ma, or Ma Huateng.  

"Our strategic investments in AI are benefitting us in business areas such as ad targeting   and game engagement, as well as in efficiency enhancement areas such as coding, and game and video   production,"   said Ma in a statement.

Tencent   said the   third   quarter saw it   enhanced   its large   language   model   ( LLM )   HunYuan ’ s complex reasoning   capabilities, especially in coding,   mathematics, and science. HunYuan image generation model is ranked first globally among text-to-image   models by LMArena.  

"We are upgrading the team and architecture of our HunYuan foundation model, whose image and 3D generation models are now industry leading,"   said Ma. "As HunYuan ’ s capabilities continue to improve, our investment in growing Yuanbao adoption, and our effort in developing agentic AI capabilities within Weixin, will gain further traction."

Tencent ’ s bread-and-butter gaming   delivered   a double-digit YoY   growth for the fourth   consecutive quarter. VAS ( value-added services ) , including game and social network business, raked in   RMB95.9   billion with a 16% YoY rise,   the same increase   as the June   quarter.   

Domestic Games brought RMB42.8   billion, representing a YoY rise of 15% after a 17% increase for the preceding quarter.   Tencent said it primarily reflected contributions from recently released games such as Delta Force, growth in revenues from evergreen games such as Honour of Kings and Peacekeeper Elite, and the expansion of VALORANT from PC to mobile.   Revenue from

Revenue from International Games grew   43% YoY to RMB20.8   billion, refreshing the quarterly record set in   the second quarter   with a 35% YoY increase. Acceleration of International Games was mainly due to   higher revenues from Supercell ’ s games, recognizing   revenue upfront on copy sales of new game release, and to consolidation of recently acquired studios. Social Networks revenues gained 5% YoY to RMB32.3   billion, driven by growth in Video Accounts live streaming revenue, music subscription revenue and Mini Games platform service fees.

Revenues from Marketing Services   advanced to RMB36.2   billion for the second   quarter   with a 21% YoY   increase,   compared with   a growth rate of   20%   for   the previous   two   quarters.   The growth was primarily due to higher ad impressions, benefiting   from increased user engagement and ad load, coupled with higher   eCPMs, driven by AI-powered ad targeting.   Advertising spending   increased across all major industry categories   during the   third   quarter.

Revenues from FinTech and Business Services popped   10% YoY to RMB58.2   billion, the same   YoY increase for the second   quarter. The revenue growth grew at a   high   single-digit percentage rate   YoY, thanks to   higher   revenues from commercial payment activities and consumer loan services. Business Services revenues grew   at a teens percentage rate year-on-year, reflecting higher cloud services revenues, including those driven by   increased enterprise customer demand for AI-related services, and higher eCommerce technology service   fees arising from growth in Mini Shops gross merchandise value, or GMV.

Tencent ’ s results still came ahead of most estimates despite the market expecting a strong performance for the quarter, positioning Tencent as "the most ‘ reputable ’ company with stable/consistent performance",   commented Citi analysts. "The only possible disappointment if any would be the capex," analysts led by Alicia Yap   said in a note.

Tencent ’ s capital expenditure   shed 24% YoY   to RMB13.0   billion   after the Capex   surged   119% YoY   to   RMB19.1   billion three months   earlier. That marked   a 31.9%   sequntial decrese   in   Capex   during a period marked by geopolitical volatility and economic uncertainty.