From increasing spending to WeChat Agent, the market is waiting for Tencent's AI double strike

Author | Huang Yu

After more than three years of competition in AI large models, the first half of the global AI race has concluded.

At this critical juncture, Tencent, which has firmly held the "throne" of the internet era, has been questioned by the outside world for "falling behind" due to its inability to present a phenomenal large model and AI applications.

Unwilling to be marginalized, Tencent has quietly accelerated since the end of last year, introducing top talents like former OpenAI researcher Yao Shunyu while undergoing a series of AI team reorganizations.

Amid the global "lobster" craze, Tencent is attempting to launch a major counterattack in AI through intensive product deployment.

Facing Tencent, which is at a critical period of valuation recovery, investors are waiting for the management to provide a vision that can lead to a market re-evaluation.

On March 18, Tencent Holdings ( 00700.HK ) released its performance report for the fourth quarter and the full year of 2025. In the fourth quarter of last year, Tencent's revenue grew by 13% year-on-year to 194.37 billion yuan, and Non-IFRS operating profit increased by 17% year-on-year to 69.52 billion yuan. For the full year, revenue reached 751.77 billion yuan, a year-on-year increase of 14%, and Non-IFRS operating profit grew by 18% year-on-year to 280.66 billion yuan.

This is a financial report that exceeds market expectations. However, investors believe that Tencent's continuous growth is not difficult; the real challenge lies in whether it can maintain its industry position in the AI era.

Tencent President Liu Chiping revealed at the financial report meeting that Tencent's capital expenditure of 79.2 billion yuan for 2025 is indeed lower than the original target, mainly affected by GPU supply. "We hope to see a greater increase in capital expenditure in 2026, while also increasing investment in flexible leasing, thereby enhancing overall computing power acquisition through these two aspects."

He pointed out that Tencent currently has a relatively clear strategic plan for AI, and it is important to continue doing some very important and correct things in the next two or three quarters. I believe that once these things are done, quantifiable progress will naturally emerge. It is reported that Hunyuan 3.0 is currently in the internal testing phase and will gradually be opened to the public in early April.

Difficulties in Spending on Unavailable Cards

After two years of drastic reforms, Tencent restored double-digit revenue growth in the fourth quarter of 2024, and is expected to maintain this growth level throughout 2025.

Tencent's management pointed out that the reason for maintaining growth in 2025 is due to AI technology enhancing advertising targeting capabilities and player interactions in games, as well as accelerated growth in cloud business revenue achieving scalable profitability.

As Tencent's pillar business, gaming is the most critical business driving stable revenue growth.

The financial report shows that in 2025, Tencent's gaming business revenue reached 241.6 billion yuan, a year-on-year increase of 22%, accounting for 32.1% of total revenue. Among them, the annual revenue from the domestic gaming market grew by 18% year-on-year to 164.2 billion yuan. The annual revenue from the international gaming market reached 77.4 billion yuan, a year-on-year increase of 33%, setting a historical high In the second half of the AI "application competition," Tencent Games has become an important scene for the competition. Tencent's financial report specifically mentioned that game AI is effectively accelerating content production, improving user experience, and enhancing marketing effectiveness.

Although the moat business is solid, Tencent is currently very cautious in its expansion, and it has clearly stated that the only area worth investing in ahead of time may be AI.

Compared to the more than double growth in capital expenditure in 2024, reaching 76.7 billion yuan, Tencent's capital expenditure for 2025 is about 79.2 billion yuan, with a growth rate that is not only relatively smooth but also stands in stark contrast to Alibaba and ByteDance's high-profile announcements of infrastructure investments in the hundreds of billions.

Liu Chiping explained that Tencent spent a relatively large amount of money on share buybacks last year because it couldn't buy "cards." If it can buy "cards" this year, it may appropriately reduce share buybacks to increase capital expenditure.

At the same time, Liu Chiping pointed out that Tencent invested 18 billion yuan in new AI products last year. This year, it plans to at least double that amount. "The solid and sustainable growth of our core business can support increased investment in AI."

Tencent was once the absolute winner of the mobile internet, firmly holding the position of "king of Chinese tech stocks" with its two moat businesses: social networking and gaming.

However, due to the suspected "lagging behind" in this round of the AI arena, Tencent's stock price has continued to decline since October last year, closing at about HKD 550.5 per share on March 18, with a total market value dropping to HKD 5 trillion.

AI Counterattack with Hidden Cards

AI has now become a key concern for the market regarding Tencent.

In 2025, Tencent adjusted its organizational structure and increased AI reconstruction across multiple business scenarios.

Whether it is integrating AI product lines like Yuanbao into CSIG (Cloud and Smart Industry Group) to accelerate commercialization, or deeply integrating large model capabilities into WeChat Search, Tencent's strategic intention is clear: not to demand an independent AI super app, but to make AI a part of Tencent's ecological infrastructure.

However, this typical defensive counterattack is revealing obvious limitations in the current rapidly growing AI battlefield.

Especially with the acceleration of the Agent era, the market has concerns about Tencent's development and investment in the AI field. Under the dual pressure from Alibaba and ByteDance, there is indeed a risk of lagging behind.

The model side, which concerns underlying capabilities, remains a particularly important aspect valued by the market.

Liu Chiping pointed out that in the past few months, Tencent has conducted intensive organizational upgrades and workflow restructuring for the mixed Yuan model team, while also rebuilding the entire pre-training and reinforcement learning infrastructure, as well as further improving data quality.

Through a series of adjustments, Tencent hopes to create a model with stronger intelligence while accelerating the overall iteration speed.

In Tencent's AI actions, applications seem to have attracted more attention.

This Spring Festival, as the pioneer of Tencent's AI native applications, Yuanbao spent 1 billion yuan to take the lead in the red envelope battle. Although daily active users once surged to over 50 million, there was a noticeable drop after the holiday.

Liu Chiping believes that Yuanbao has already accumulated a considerable user base, and the Spring Festival promotion met the company's expectations Next, Yuanbao aims to acquire new users and improve retention rates through continuous iteration of experiences, including dialogue capabilities and search abilities. "It is now evident that as these capabilities improve, user activity and retention rates will continue to rise."

At the same time, Liu Chiping candidly stated that many users continued to choose Yuanbao despite not having a very good experience before, precisely because of its close integration with the Tencent ecosystem. In the future, Yuanbao will further strengthen its collaboration with the Tencent ecosystem.

From the Yuanbao heavily promoted during the Spring Festival to the current comprehensive layout around OpenClaw, these are all clear signals from Tencent.

Starting in March 2026, Tencent will launch a matrix product plan centered around lobsters, referring to it as the "Lobster Special Forces." This product matrix not only covers novice users but also targets hardcore developers and large enterprises, aiming to break through the usage barriers of "lobsters."

Pony Ma pointed out at the earnings conference that "lobster" is a decentralized entry point that can better leverage Tencent's resource advantages, allowing various fronts to work together, and it has also inspired the development of the WeChat Agent currently in progress.

Of course, Tencent's biggest AI trump card remains WeChat.

Last year, Tencent's management mentioned multiple times that they would create an AI Agent embedded in the WeChat ecosystem, operating based on WeChat's unique ecosystem.

Recently, several media outlets reported that Tencent is secretly developing an AI agent for its application WeChat, with plans to start gray box testing in mid-year, and it is expected to be launched to all users as early as the third quarter.

Liu Chiping confirmed that the next step is to create an AI Agent within WeChat.

This Agent can rely on WeChat to closely interact with users and create a very rich ecosystem, including mini-program ecosystems, content ecosystems, transaction ecosystems, social ecosystems, and payment ecosystems, allowing this intelligent agent to not only chat with users but also perform many practical tasks.

"However, the WeChat user base is vast and faces privacy and security issues, requiring further enhancement of model capabilities to address these concerns." Liu Chiping stated that the WeChat AI Agent is already progressing, but there is currently no clear timetable.

Perhaps after years of dormancy, as the focus of the AI industry competition shifts from "comparing model parameters" to "comparing implementation capabilities," Tencent has found the most suitable hitting point for itself and is taking swift action.

Analysts at China Merchants Securities believe that the market still underestimates Tencent's historical development and competitive barriers, while the emergence of "little lobsters" may help Tencent find its "WeChat" in the AI era.

With 1.4 billion monthly active users in the WeChat ecosystem and abundant cash flow, Tencent is far from being out of the game. However, whether this comprehensive offensive around AI is timely and whether the trump cards surrounding lobsters and WeChat can ultimately solidify its current core position in the internet remains to be tested by the market