What to watch in the earnings reports of Chinese concept giants this week? JD.com's "takeout war," Alibaba and Tencent's "AI investment and application progress"

Tencent, Alibaba, and JD.com will release their Q1 2025 financial reports this week, with overall performance expected to be healthy and outlook optimistic.

According to Chasing Wind Trading Platform, on May 12, Goldman Sachs analyst Ronald Keung and his team released a research report analyzing and forecasting the latest performance of Tencent, Alibaba, and JD.com.

Goldman Sachs stated that despite the uncertainties in the macro environment, leading internet companies still demonstrate strong profitability and growth potential due to their advantages in their respective fields.

The report forecasts that Tencent Group's revenue will grow by 10% year-on-year in Q1, with group EBIT increasing by 16% year-on-year; Alibaba's e-commerce management revenue is expected to grow by 9% year-on-year, with group EBIT increasing by 12% year-on-year; JD.com's retail revenue is expected to maintain the previous quarter's growth rate, with profit growth potentially surging to 28%.

Tencent: Advertising Revenue and AI Integration Become Highlights

Tencent will release its financial report on May 14, and Goldman Sachs expects Q1 game revenue to grow by 15%, advertising revenue to grow by 18%, and adjusted group EBIT to be RMB 67.8 billion (up 16% year-on-year). Goldman Sachs expects Tencent's earnings per share growth rate for the fiscal year 2025 to be 14%, higher than the market consensus expectation of 11%.

Investor Focus Includes:

• AI-Driven Advertising Technology Upgrades - Attention on new advertising inventory within the WeChat ecosystem (AI search advertising products) and improvements in click-through rates of existing advertising products.

• Sustainability of Game Revenue Growth - Focus on the launch of new games like "Valorant" and the revitalization of classic games.

• Progress in AI Applications - Tencent's unique AI agency opportunities within the WeChat ecosystem and the outlook for AI capital expenditures under foreign high-end chip restrictions.

• Impact of Export to Domestic Sales Policy - Effects on the average order value of goods/services paid through WeChat Pay.

Alibaba: Cloud Business and E-commerce Competition are the Focus

Alibaba will release its financial report on May 15, and Goldman Sachs expects single-digit growth in GMV for Q4, with Taobao-Tmall management revenue growing by 9%, and Taobao-Tmall EBITA reaching RMB 39 billion (up 1% year-on-year), while group EBITA is expected to be RMB 26.8 billion (up 12% year-on-year).

Investor Focus Includes:

• Alibaba Cloud Capital Expenditures and Revenue Growth - Outlook on AI inference demand growth and foreign chip restrictions.

• Alibaba Cloud Profit Margin Trends - Balancing the increase in AI training and inference revenue contributions with the rise in AI-related depreciation.

• E-commerce Competitive Landscape - Impact on Taobao-Tmall fee outlook, especially changes after the one-year anniversary of introducing software service fees in September 2024.

• Taobao-Tmall EBITA Profit Margin Outlook - Ongoing investments in user experience, merchant support measures, and instant shopping.

• International Business Outlook - Prospects for cross-border business and future investment scale/duration amid changing geopolitical environments

• Shareholder Returns and Capital Expenditure/Free Cash Flow Balance - In the first quarter of 2025, buybacks slowed to $600 million, down from $1.3 billion in the fourth quarter of 2024.

JD.com: New Delivery Business and Retail Core Competitiveness

JD.com will release its financial report on May 13. Goldman Sachs expects JD Retail's year-on-year revenue growth in the first quarter to maintain the level of the previous quarter, with JD Retail EBIT at RMB 11.9 billion (year-on-year growth of 28% / 4.7% profit margin), and group net profit at RMB 10.5 billion (3.6% profit margin).

Investor focus includes:

• Update on Group Net Profit Guidance for Fiscal Year 2025 - Whether it will be adjusted from the previous high single-digit profit growth guidance (relative to Goldman Sachs' latest revised stable profit expectations for the group).

• Mid-term Goals for Delivery Business - Given the unexpectedly rapid growth in delivery order volume, the long-term impact on group profits.

• Delivery User Retention Strategy After Subsidy Normalization - Addressing delivery time/cost disadvantages and increasing cross-selling of instant shopping.

• Sustainability of Healthy Revenue Growth - Focus on the cross-selling situation from clothing, department stores, and delivery to retail.

• Impact of Stock Buyback Plan - The effect of increased delivery investment and recent stock price declines on the buyback plan/budget.

AI Capital Expenditure Will Be a Major Variable This Year

Additionally, Goldman Sachs made predictions about future trends in the report.

Goldman Sachs believes that AI will be a key driver of growth in China's internet industry in the coming years. In particular, the application of AI in areas such as cloud computing, advertising technology, and local life services will bring new growth opportunities.

The report states, AI capital expenditure will be a major variable this year, with Chinese internet giants' capital expenditure expected to remain high but growth may slow this year, reflecting uncertainties in the supply chain and geopolitical landscape.

Furthermore, the report anticipates that industry competition will remain fierce, especially in the delivery and e-commerce sectors. Competition between new entrants and existing giants will drive market changes and impact company profitability