Hong Kong Stock Concept Tracking | The fastest growth in three years and comprehensive exceeding expectations! Tencent's quarterly report is impressive and will have a significant uplifting effect on Tencent-related stocks (including concept stocks)

According to Zhitong Finance APP, on May 14, Tencent Holdings (00700) announced its comprehensive and better-than-expected performance for the first quarter of 2025. The financial report shows that the company’s revenue was 180.022 billion yuan (RMB, the same below), a year-on-year increase of 13%; net profit was 47.821 billion yuan, a year-on-year increase of 14%; adjusted net profit was 61.329 billion yuan, a year-on-year increase of 22%. Earnings per share were 5.252 yuan, a year-on-year increase of 17%; non-International Financial Reporting Standards earnings per share were 6.735 yuan, a year-on-year increase of 25%. Notably, after the earnings report, Tencent's American Depositary Receipts (ADR) closed up more than 3%, while Tencent's Hong Kong stock rose 2.96% yesterday, with the stock price accumulating over 20% increase since the beginning of 2025.

Tencent CEO Ma Huateng stated, "In the first quarter of this year, Tencent's high-quality revenue maintained solid growth. AI capabilities have made substantial contributions to performance advertising and evergreen games, and we have increased investments in new AI opportunities such as Yuanbao applications and AI within WeChat. We believe that during the investment phase of our AI strategy, the operational leverage brought by existing high-quality revenue will help absorb the additional costs generated by these AI-related investments, maintaining financial stability. We expect these strategic AI investments will create value for users and society and generate long-term, substantial incremental returns for the company."

Specifically, Tencent's value-added services business saw revenue growth of 17% year-on-year in the first quarter of 2025, reaching 92.1 billion yuan. Domestic game revenue was 42.9 billion yuan, a year-on-year increase of 24% due to the revenue growth of "Honor of Kings" and "Peacekeeper Elite," as well as contributions from the recently released "Dungeon & Fighter: Origin" and "Delta Force." International game revenue was 16.6 billion yuan, a year-on-year increase of 23% (22% growth at fixed exchange rates), driven by revenue growth from "Brawl Stars," "Clash Royale," and "PUBG MOBILE." Social network revenue increased by 7% year-on-year to 32.6 billion yuan, benefiting from the sales of virtual items in mobile games, music subscription revenue, and service fees from mini-game platforms.

Marketing services revenue in the first quarter of 2025 grew by 20% year-on-year to 31.9 billion yuan. This growth was mainly due to strong demand from advertisers for video accounts, mini-programs, and WeChat search advertising inventory, benefiting from increased user engagement, continuous AI upgrades of the advertising platform, and optimization of the WeChat transaction ecosystem. Revenue from marketing services increased across most key industries in the first quarter.

Financial technology and enterprise services revenue in the first quarter of 2025 grew by 5% year-on-year to 54.9 billion yuan. The growth in financial technology service revenue was due to increases in consumer loan services and wealth management service revenue. The growth in enterprise service revenue was driven by increases in cloud service revenue and merchant technology service fees.

Regarding the market's focus on AI development, Tencent's senior management mentioned in the subsequent first-quarter earnings conference call that the effects of AI have emerged in three aspects: advertising accuracy + user duration; game engagement; and cloud revenue (infrastructure + API + overall solutions).

Tencent's management stated that they would increase investments in AI in terms of capital expenditures and operating expenses. For example, in advertising targeting and improving advertising effectiveness, AI can be used to enhance advertising content, improve content recommendations, and increase user spending duration, ultimately boosting advertising revenue In the past two to three months, AI has been more deeply integrated into Tencent's various businesses, but Ma Huateng pointed out that it is still too early to systematically analyze the significant changes in user behavior. Tencent is still exploring many AI features being deployed. Overall, it can be seen that user interaction with Tencent's AI assistant is continuously increasing, and overall usage is on the rise.

Tencent President Liu Chiping stated that in the past quarter, the user base of Yuanbao has significantly expanded, and Tencent has invested a lot of effort in user retention, achieving good results. In the next phase, Tencent will continue to add features to further enhance retention, activation, and attract new users. In the future, the generative AI form of chatbots will change with functionality, ultimately flexibly switching between various interaction modes based on user needs.

Looking ahead for the year, Goldman Sachs previously estimated that Tencent's revenue will grow by 10% year-on-year this year, with earnings per share expected to grow by 14%. They believe that Tencent, relying on its unique WeChat ecosystem and global gaming assets, has diversified profit channels and can achieve compound profit growth in the macro cycle. Goldman Sachs emphasized that Tencent remains one of the most recommended stocks to buy in the Chinese internet industry.

Some analysts pointed out that Tencent's Q1 2025 performance growth will have a significant uplifting effect on its affiliated stocks, mainly reflected in the following aspects: core business growth consolidates market confidence, and the significant stock price linkage effect of subsidiaries. The better-than-expected performance of Tencent's Q1 validates profitability, ecological synergy effects, and AI strategic narrative, forming multidimensional support for affiliated stocks.

Tencent-related concept stocks:

Tencent Holdings (00700): Tencent strengthened GPU procurement in the fourth quarter of last year, anticipating that its cloud computing business will grow or accelerate in the second half of this year. Credit Lyonnais believes that Tencent is relatively defensive amid tariff uncertainties, maintaining a target price of HKD 645, predicting that the company's revenue and profit compound annual growth rate will reach double digits and 15% to 20% over the next three years.

Weimob Group (02013): Weimob officially launched five major solutions for "Weimob X WeChat Store" on January 9, 2025, aimed at helping merchants achieve efficient integration and business growth within the WeChat Store ecosystem. Through an integrated public and private domain operation solution, Weimob helps merchants achieve full-process integration from store management to precise marketing, significantly reducing technical barriers and operational complexity.

Yuewen Group (00772): Tianfeng Securities pointed out that the company is expected to build barriers in the long term through a good content ecosystem, rich IP reserves, and diversified business chain expansion capabilities, steadily improving profitability. Given the company's continuous optimization of content distribution mechanisms, they maintain a "Buy" rating.

Tencent Music-SW (01698): Jefferies pointed out that Tencent Music's first-quarter revenue and non-International Financial Reporting Standards (non-IFRS) net profit were basically in line with expectations. Management reiterated the goal of accelerating revenue growth and profit margin expansion this year during the conference call. For the second quarter, the firm expects the company's revenue to increase by 9% year-on-year to RMB 8 billion. For the full year of 2025, the firm expects total revenue to increase by approximately 9.5% year-on-year to RMB 31 billion. They maintain a "Buy" rating