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Published on
March 19, 2025
5 min read
Tencent Increases AI Spending as Gaming Industry Revenue Pushes Profit Up 90%
Chinese company Tencent has reported a 90% increase in its quarter four earnings. The Chinese company’s profits were driven by its advertising and gaming industry revenue, CNBC reported.
The tech giant also increased its capital spending in the quarter under review as it focused on AI amid fierce competition from rivals such as Alibaba. Tencent reported a surge in AI revenues from activities like advertising and cloud computing.
Surpassing Projections
Tencent reported $23.9 billion in quarter four revenue. This was slightly higher than the $23.4 projected by analysts. Profits attributable to equity shareholders also increased slightly to $7.1 billion compared to the expected $6.3 billion.
Tencent is among the world’s largest gaming firms. In quarter four, its revenue from domestic games rose 23% year on year. The tech giant attributed this surge to growth in its user base as more players embraced hit games like Peacekeeper Elite and Honor of Kings. The company recorded a 15% increase in revenue generated outside
Chinese borders. With the local gaming market slowing down due to regulatory and macroeconomic challenges, the company is doubling overseas efforts with games such as Tencent PUBG Mobile. Revenue from the company’s advertising business rose by 17% in the fourth quarter.
Tencent owns the largest messaging app in China, WeChat. The app has 1.38 billion active users per month. The company has been seeking to monetize the platform by advertising products like search and videos.
Focusing on AI
Although Tencent maintains a lead in gaming globally, the tech giant has placed strong focus on establishing itself as an important AI player in China. This focus came with increased spending, pushing Tencent’s 2024 capital expenditure to 76.8 billion yuan compared to the 23.89 billion spent in 2023.
The AI spending was directed to acquisition of graphics processing units and servers. The tech giant has reorganized its teams and expects the increased spending to facilitate growth.
“Starting a few months ago, we have reorganised our AI teams to sharpen focus on both fast product innovation and deep model research, increased our AI-related capital expenditures, and increased our research and development and marketing efforts for our AI-native products. We believe these stepped-up investments will generate ongoing returns via uplifting productivity in our advertising business and longevity of our games, as well as longer term value from accelerated consumer usage of our AI applications and enterprise adoption of our AI services,” Tencent said.
Investors are waiting to see how Tencent will monetize AI investments on customer-facing platforms like WeChat.
Tencent AI Models
Tencent has developed various AI models for its own use over the last two years. The tech giant has an inhouse AI bot called Yuanbao. This chatbot is based on DeepSeek’s R1 model as well as the company’s Hunyuan foundational model.
Tencent is looking to integrate DeepSeek’s technology in its Chinese products including the search feature on its WeChat messaging app. The recent AI push reflects the current competition among Chinese tech companies. The competition has been triggered by DeepSeek’s highly efficient AI model launched earlier this year. Since then, companies like Baidu and Alibaba have been releasing AI updates at a much faster rate.
This past weekend, Baidu introduced two AI models, one being a new reasoning model. Alibaba also unveiled an update of its AI assistant that is powered by its reasoning model, its Qwen AI last week. Tencent also revealed Hunyuan3D 2.0 model. This AI model can convert images and text into 3D graphics.
The company had also launched an AI-powered chatbot Turbo S to respond to user queries fast. The company says that AI is facilitating product improvements across the company. For instance, the technology has driven its advertising business growth. The company also said that revenue from Tencent’s AI cloud computing unit doubled in 2024. The business is housed in its fintech and business service decision, which recorded a 3% growth in quarter four.
