Tencent misses Q1 estimates as AI investment climbs

Tencent reported first-quarter revenue of 196.5 billion yuan (US$28.9 billion) and net profit of 58.1 billion yuan (US$8.56 billion), both below analyst estimates.

The Chinese tech company stepped up AI investment amid tougher competition and US chip export curbs.

Gaming and advertising drove the increase as domestic game sales rose 6%.

International game revenue rose 13%, and online advertising rose 20% to 38.2 billion yuan (US$5.63 billion).

Capital spending climbed to 31.9 billion yuan (US$4.7 billion) from 27.5 billion yuan (US$4.05 billion) a year earlier.

The increase came after Tencent said in March it would boost AI investment and unveiled its Hunyuan 3.0 model last month.

Pressure on AI chip supply should ease as Chinese-designed chips raise output, said Chief Strategy Officer James Mitchell.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Tencent’s AI push weighs on profits by choice

Reported profit understates how well Tencent’s older businesses are doing, especially gaming and advertising.
Without new AI products, non-IFRS operating profit rose 17% from a year earlier. With those products included, growth was 9% 1.
The bill is large. Tencent spent 18 billion yuan (US$2.65 billion) on its Hunyuan large language model and Yuanbao AI chatbot in 2025. It plans to more than double that outlay in 2026 2.
Capital spending jumped 84% from the prior quarter as Tencent added more servers, the computing systems that run AI services 3.

Tencent’s AI strategy hinges on chips made in China

US chip rules are more nuanced than a blanket curb. Washington now reviews exports of some advanced AI chips to China case by case, including chips comparable to Nvidia’s H200 and AMD’s MI325X 4.
At the same time, China’s government has reportedly paused customs clearance for H200 chips and told Chinese companies to avoid those purchases unless necessary 4.
That helps explain Tencent’s focus on China-designed AI chips. The company also expects AI capital spending to climb in the second half of 2026 as supply improves 1.