Tencent's performance in the third quarter of 2025 was strong, significantly exceeding market expectations. AI is becoming the core new engine of its growth, significantly driving accelerated growth in advertising revenue and empowering the cloud business to acquire more enterprise customers. At the same time, the gaming business, especially in international markets, has shown explosive growth.
According to Chasing Wind Trading Platform, on November 13th, Goldman Sachs released a report stating that the core signal of this financial report for investors is: AI is no longer a long-term story, but is creating tangible revenue and profits for Tencent. The strong momentum of the two cash cow businesses, advertising and gaming, combined with the efficiency improvements and monetization potential brought by AI, is reshaping the company's growth curve.
However, the report also pointed out a key variable—an unexpected decline in capital expenditures, and its subsequent direction will be an important indicator for the market to judge Tencent's commitment to AI infrastructure investment. Meanwhile, the company's ongoing large-scale stock buybacks have also conveyed management's confidence in the current stock price to the market.
<h2>Performance Exceeds Expectations, AI Becomes New Growth Engine</h2>
Goldman Sachs pointed out that Tencent's performance in the third quarter of 2025 can be described as &#34;solid,&#34; with revenue growing 15% year-on-year, exceeding expectations; adjusted operating profit increased 18% year-on-year, reaching 72.6 billion RMB, which is basically in line with expectations. The core driver of this strong performance comes from the accelerated penetration and application of AI technology across various business lines.
The report believes that AI has not only accelerated the growth of the advertising business but also brought new growth momentum to the cloud business, with increasing demand from enterprise customers for AI-related services. This indicates that Tencent's AI strategy has gradually moved from the investment phase to the commercialization and monetization phase.
<h2>Advertising and Gaming Drive Growth, Strong Momentum</h2>
The most eye-catching parts of the financial report are undoubtedly the advertising and gaming business segments.
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Advertising Business (Marketing Services): Driven by AI technology, this business's revenue grew 21% year-on-year, reaching 36.2 billion RMB, with growth exceeding the 20% in the first half of 2025. Goldman Sachs analyzed that this is mainly due to strong demand in scenarios such as video accounts, mini-programs, and WeChat search, as well as the newly launched AIM+ automated advertising solution that improved placement efficiency and effectiveness.
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Online Gaming Business: This business achieved an astonishing 23% year-on-year growth, with total revenue reaching 63.6 billion RMB, far exceeding expectations. The growth momentum showed a dual-line explosive trend:
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<li>Domestic Games: Grew 15% year-on-year to 42.8 billion RMB, performing steadily, mainly contributed by evergreen products such as &#34;Honor of Kings&#34; and &#34;Peacekeeper Elite,&#34; as well as new titles like &#34;Valorant&#34; and &#34;Delta Force.&#34;</li>
<li>International Games: Grew as much as 43% year-on-year, reaching 20.8 billion RMB, becoming the biggest highlight. This is mainly due to the strong growth of games under Supercell and contributions from newly acquired game studios.</li>
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<h2>Significant Margin Expansion, High-Profit Business Contribution Outstanding</h2>
Thanks to the rapid growth of high-profit businesses, Tencent's profitability has significantly improved. The report shows that the company's overall gross margin in the third quarter reached 56.4%, an increase of 3.3 percentage points year-on-year
Goldman Sachs analysis indicates that the expansion of profit margins is mainly due to the shift in revenue structure towards high-margin businesses, such as a gross margin of 61.2% for value-added services and a gross margin of 56.7% for marketing services. These high-margin revenues effectively offset the increased operating expenses the company incurred in AI-native application marketing and AI project research and development, ultimately driving a year-on-year increase of 1.0 percentage points in adjusted operating profit margin.
<h2>Capital Expenditure Unexpectedly Declines, AI Infrastructure Prospects Under Scrutiny</h2>
Against a backdrop of high growth, one data point has drawn special attention from Goldman Sachs. Tencent's capital expenditure in the third quarter was RMB 13 billion, down from RMB 19.1 billion in the second quarter.
Goldman Sachs speculates in its report that this quarter-on-quarter decline may be related to factors such as &#34;chip availability or computing device leasing.&#34; This change has shifted market focus to Tencent's future capital expenditure outlook. In the context of global and domestic peers ramping up their AI infrastructure competition, the management's views on AI cloud service opportunities and future capital investment plans will be key for investors to assess its long-term AI competitiveness.
Although capital expenditure has temporarily declined, Goldman Sachs still believes that, with increasingly enhanced AI model capabilities and growing enterprise demand, external AI and cloud services will be an important emerging growth point for Tencent. Additionally, the company continued to execute stock repurchases of up to HKD 19.2 billion in the third quarter, firmly progressing towards its repurchase target of at least HKD 80 billion for the fiscal year 2025

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Tencent's third-quarter performance exceeded expectations across the board, with strong growth in advertising and gaming businesses driven by AI. International gaming revenue surged 43% year-on-year, and AI technology is transitioning from the investment phase to the commercialization phase. Goldman Sachs analysis pointed out that despite a decline in capital expenditures, external AI and cloud services will become important emerging growth points due to the increasingly enhanced capabilities of AI models and the continuously growing corporate demand. Additionally, the company's execution of a large-scale stock buyback during the same period demonstrates confidence, highlighting that AI has become the core new engine driving revenue and profit growth

- Tencent's Q3 2025 performance exceeded market expectations, driven by AI as a new growth engine, significantly boosting advertising revenue and cloud business.  
- The report from Goldman Sachs highlighted that AI is now generating tangible income and profits, with strong momentum in advertising and gaming sectors, despite a surprising drop in capital expenditures.  
- The company's overall gross margin improved to 56.4%, reflecting a shift towards higher-margin businesses, while ongoing stock buybacks indicate management's confidence in current share prices.

Advertising and gaming are both experiencing explosive growth! AI is opening up new monetization opportunities for Tencent