Tencent Holdings reported first-quarter revenue and net profit below expectations on Wednesday as the Chinese tech giant ramps up investment in artificial intelligence in an increasingly crowded market.
The Shenzhen-based company posted revenue of 196.5 billion yuan ($28.94 billion), up 9% year-on-year but short of the 198.96 billion yuan analysts had forecast. Net profit came in at 58.1 billion yuan, missing estimates of 61.42 billion yuan.
Revenue growth was driven by gaming, with domestic gaming takings rising 6% and international revenue up 13%.
Flagship titles including "Honour of Kings" and "Peacekeeper Elite" sustained user engagement, while tactical shooter "Delta Force" also contributed.
Online advertising revenue rose 20% to 38.2 billion yuan, helped by AI-driven targeting.
Tencent last month unveiled Hunyuan 3.0, its most advanced large language model and its first major release since hiring former OpenAI researcher Yao Shunyu to lead its AI platform development.
The launch underscores Tencent's efforts to narrow the gap with rivals ByteDance and Alibaba, which analysts say have moved more aggressively in deploying AI.
Tencent said in March it would increase AI spending this year, including investment in proprietary models. President Martin Lau said the company plans to raise capital expenditure in 2026, without giving details.
Total capex was about 79 billion yuan last year, up from 77 billion yuan in 2024. First-quarter capex rose to 31.9 billion yuan from 27.5 billion yuan a year earlier.
The investment push comes as Tencent and other Chinese tech companies face difficulties obtaining advanced chips from Nvidia due to U.S. export restrictions.
Speaking on a post-earnings call, Chief Strategy Officer James Mitchell said the situation was expected to ease as domestically designed AI chips progressively ramp up production, making more capacity available.
Tencent spent 1 billion yuan promoting its Yuanbao AI chatbot during the Lunar New Year holiday as it seeks market share in China's competitive AI sector.
($1 = 6.7902 Chinese yuan renminbi)
(Reporting by Liam Mo in Beijing and Miyoung Kim in Singapore. Editing by Alexander Smith, Mark Potter and Keith Weir)
