As global markets brace for a shifting tech landscape, Tencent Holdings—the largest tech firm in China by market cap—delivered an impressive first-quarter performance for 2025. Backed by double-digit revenue growth, strategic AI expansion, and a rebound in gaming, Tencent’s Q1 report offered a compelling snapshot of its evolving dominance.
As international and domestic demand merge with evolving regulation and innovation, Horizon28’s financial analyst, Marie Konigsberg, unpacks the numbers, reveals underlying dynamics, and assesses whether this trajectory has legs beyond Q1.
Q1 Headline Figures: Strong Revenue, Mixed Profit
Tencent reported total revenue of 180 billion yuan ($24.97 billion) for Q1 2025—a 13% year-over-year increase, comfortably beating the analyst consensus of 174.6 billion yuan. Despite the revenue beat, net profit came in at 47.8 billion yuan, below the expected 52.2 billion yuan, highlighting a tension between aggressive investment and immediate return.
The Zacks Consensus Estimate had pegged revenue slightly lower at $24.26 billion, indicating that Tencent exceeded both local and international forecasts. Meanwhile, earnings per share were estimated at $0.88, reflecting 18.92% year-over-year growth, in line with the company’s strong topline.
Gaming Fuels the Core Engine Once Again
Gaming continues to be the bedrock of Tencent’s revenue profile. After navigating regulatory tightening in prior years, the easing of restrictions in China has unlocked a fresh surge in player engagement.
- Domestic gaming revenue jumped 24% year over year to 42.9 billion yuan.
- International gaming revenue rose 23%, reaching 16.6 billion yuan.
Popular titles like Dungeon & Fighter Mobile (launched May 2024) and Delta Force (September 2024) proved instrumental. These evergreen and new-age games helped daily active users (DAU) hit multi-year highs during the 2025 Spring Festival, suggesting that user retention and monetization are both on the rise.
Adding to the bullish momentum, deferred revenue—a forward-looking metric tied to in-game purchases—grew by a high-teens percentage year over year, hinting at sustained future income.
AI: Investment Now, Monetization Later
Tencent’s deeper shift into AI development has become a central theme of its 2025 strategy. The company disclosed that it would allocate a low double-digit percentage of annual revenue toward capital expenditure, primarily targeting AI infrastructure, model training, and talent acquisition.
In Q1 alone:
- R&D spending grew 21% year-over-year.
- Capital expenditure surged by 421%, with a substantial chunk directed toward AI.
Tencent’s proprietary large language model, Hunyuan, has seen continued evolution. A scaled-down version called T1 was launched publicly in March. Tencent also became the first major Chinese tech firm to integrate third-party AI technology from DeepSeek, a local startup making waves for producing cost-efficient models that rival Western offerings.
These models are now integrated into key Tencent products:
- WeChat, the all-in-one messaging and payment app with over 1 billion users.
- Yuanbao, Tencent’s AI-native assistant, saw a 20x growth in DAU between February and March.
However, the full revenue impact from AI initiatives remains muted, owing to supply constraints in GPU availability and internal allocation priorities. Installation efforts during Q1 are expected to set the stage for stronger monetization in later quarters.
Advertising Reaps AI Dividends
Marketing services continue to reflect the benefits of AI integration. In Q1, marketing revenue hit 17.7 billion yuan, a 22% increase year over year.
Notable drivers included:
- AI-enhanced ad tech, leading to sharper audience targeting and better performance metrics.
- Weixin (WeChat) Search ads, which more than doubled compared to the prior year.
- Video Accounts Marketing Services, which continued its over 60% growth trajectory.
Categories like e-commerce, healthcare, education, FMCG, and financial services saw particularly strong advertiser demand, making this segment a robust revenue pillar.
FinTech and Business Services: Mixed Signals
Tencent’s FinTech and Business Services segment, which includes consumer payments, cloud, and wealth management, brought in 27.6 billion yuan, marking a 16% rise.
- Commercial payments volumes were up, but average selling prices remained under pressure, a continuation of last quarter’s trend.
- Cloud services revenue remained constrained, largely due to GPU diversion to internal AI development.
Despite these limitations, installation and back-end infrastructure upgrades carried out during the quarter lay the groundwork for a cloud and business services rebound in upcoming quarters.
Conclusion: Foundations Laid, Growth Horizon Widening
Tencent’s Q1 2025 paints a picture of a company in transition, not turmoil. While net profit fell short of expectations, the 13% revenue growth, gaming resurgence, and AI ecosystem buildup indicate forward momentum with strategic underpinnings.
From blockbuster games driving user retention to AI assistants scaling quickly and marketing tools becoming smarter, Tencent is layering innovation across its business groups. While short-term margin pressure persists, long-term competitive advantages are forming.
As Marie Konigsberg reflects, this is a rare window where patient capital meets transformational tech at scale. Whether Tencent’s AI investments yield financial returns in Q2 or Q4, the groundwork is being laid now. And in markets, foresight often beats hindsight—especially when strategy aligns with scale.
