Accelerating AI spend to solidify future edge

Research evidence excerpt

Accelerating AI spend to solidify future edge

Macquarie Equity Research Tencent

Key Risks to Investment Thesis Company Description

• Stronger/weaker-than-expected macro conditions that Tencent is one of the world’s leading internet companies with

could pressure growth in the ads and FBS segments. a strong ecosystem in both consumer and enterprise internet.

• Faster/slower-than-expected AI development. Tencent operates the social platform Weixin/WeChat, which

• Less/more-intense competition in the advertising/games boasts ~1.4 bn monthly active users globally. It also offers a

wide array of services ranging from online games and videos segments.

to music literature. Tencent operates online payment platform

• Regulatory headwinds affecting games or delays to major Weixin/WeChat Pay and offers enterprise services through

title launches. Tencent Cloud.

• Share sell-downs by major investors.

Figure 1 - Tencent: Revenue breakdown and outlook Figure 2 - Tencent: Gross profit margin trend

Rmb bn Rmb bn

1,200 700 70%

2%

1,000 1% 600 60%

1% 30%

800 1% 30% 500 50%

1% 31%

1%

600 1% 32% 23% 400 40%

33% 21% 32%

31% 18% 19% 300 30% 400

17% 10% 10% 9% 10% 16% 15% 9% 8% 8% 21% 200 20% 22% 22% 21% 200 21% 22% 23%

0 21% 21% 19% 18% 17% 16% 15% 100 10%

2022 2023 2024 2025 2026E 2027E 2028E 0 0%

Social networks Domestic games International games 2021 2022 2023 2024 2025 2026E 2027E 2028E

Online ads FBS Others Gross profit Gross profit margin % (RHS)

Source: Company data, Macquarie Research, July 2026 Source: Company data, Macquarie Research, July 2026

Tencent (700 HK) CNY/(bn) unless otherwise noted

Income Statement Dec FY 2025A 2026E 2027E 2028E Q1/26A Q2/26E Balance Sheet 2025A 2026E 2027E 2028E

Revenue 751.8 827.7 916.5 1,008 196.5 202.3 Cash 384.8 457.0 475.0 457.3