TMTPOST --   Tencent Holdings Ltd.   management on   Thursday tried to   reassure   investors as chip   shortages   are still curbing its cloud business.

Credit：Tencent

Tencent ’ s   graphic processing units ( GPUs )   are sufficient for   internal use, and improvements in its   Hunyuan foundation   model and team are ongoing,   the President Martin Lau   told analysts   at an earnings call   when   asked whether   there   is a risk that the company ’ s artificial intelligence ( AI )   investments are not aggressive enough, potentially losing market share to competitors.

Lau   acknowledged chip shortages are constraining the growth of Tencent ’ s cloud business, which rents out computing to developers.   "One constraint of the cloud business growth is the availability of AI chips. When AI chips are in short supply, we prioritize internal use instead of renting it out externally," Lau said. "If there weren ’ t an AI chip supply constraint, our cloud revenue would be growing more quickly."

Tencent has made many improvements in its   team, talent acquisition, and Hunyuan infrastructure, as well as the entire Hunyuan research process, and felt satisfied with   the progress   it   has   made, Lau said, adding that   improvement in Hunyuan capabilities will continue to accelerate.  

"The blue-sky scenario is that eventually Weixin, with an AI agent, can help a user do a lot of tasks," said   Lau. "At this time, this is at a very early stage of development."

Financial results released on Thursday   showed Tencent maintained solid   top and bottom   line   for the quarter   ended on September 30, but the capital expenditure, or   Capex, declined   significantly.

Tencent ’ s   revenue rose 15% year-over-year ( YoY )   RMB192.87   billion   ( $27.2   billion )   for the   September quarter, beating   an   average estimate   of   RMB188.8   billion, according to Bloomberg.   On an IFRS basis, the profit attributable to equity holders of the company, or net income, soared 19% YoY to RMB63.13   billion, while   analysts   anticipated   net   income would add around 5%   following a 17% YoY increase. Capex 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.

Tencent attributed   the   stellar growth   to   its heavy investment in   AI technology   and leverage of AI   tools to boost   major businesses. "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 Tencent Chairman and CEO Pony Ma, or Ma Huateng   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."