The article "After the Performance" summarizes the investment ratings and target prices from brokerages following Tencent's quarterly results announcement

Tencent (00700.HK) opened nearly 1.6% lower this morning at HKD 645, dipping to a low of HKD 641 during the session, a decline of 2.3%. It later rebounded to a high of HKD 659, and is currently reported at HKD 651, down 0.8%. The company announced its third-quarter results after the market closed yesterday, with a non-International Financial Reporting Standards (non-IFRS) net profit growth of 18% year-on-year, reaching RMB 70.551 billion, surpassing the comprehensive forecast of 12 brokerages ranging from RMB 65.2 billion to RMB 68.895 billion. CICC indicated that Tencent's third-quarter revenue and non-IFRS net profit exceeded their original expectations by 2% and 5%, respectively, based on strong growth in gaming, and raised their revenue forecast for 2026 by 1%, while adjusting the non-IFRS net profit for 2025 and 2026 upwards by 2%.

Tencent announced its third-quarter results after the market closed yesterday, with a net profit of RMB 63.133 billion, a year-on-year increase of 19%, beating the comprehensive forecast of 6 brokerages ranging from RMB 55.857 billion to RMB 58.891 billion. During the quarter, revenue was RMB 192.869 billion, a year-on-year increase of 15%. Among them, revenue from value-added services grew by 16% year-on-year to RMB 95.9 billion. International market gaming revenue increased by 43% year-on-year to RMB 20.8 billion. Domestic market gaming revenue grew by 15% year-on-year to RMB 42.8 billion. Social network revenue increased by 5% year-on-year. Revenue from marketing services grew by 21% year-on-year in the third quarter. Revenue from financial technology and enterprise services increased by 10% year-on-year.

Tencent's gross profit margin in the third quarter rose from 53% in the same period last year to 56%, with the gross profit margin for value-added services reaching 61% (57% in the same period last year), mainly benefiting from the increased contribution of several self-developed high-margin games. The company also stated that as of the end of September, it repurchased a total of 35.36 million shares on the Hong Kong Stock Exchange at a total cost of approximately RMB 21.1 billion (excluding expenses), and the company had previously indicated that it would repurchase no less than RMB 80 billion this year. As of the end of September, Tencent's net cash amounted to RMB 102.422 billion (compared to RMB 74.592 billion at the end of June this year). This quarterly increase was mainly due to generated free cash flow, partially offset by cash expenditures of RMB 19.2 billion used for share repurchases.

【Strong Performance Expectations and AI Expansion】

Goldman Sachs stated that Tencent's third-quarter performance was robust, recording the fastest revenue growth in nearly four years (+15%, accelerating from the second quarter) and sustained compound profit growth (adjusted operating profit increased by 18% year-on-year), further strengthening their positive view on the company. With its unique WeChat ecosystem, global gaming assets, and diversified monetization levers, Tencent is expected to continue achieving compound profit growth across different macro cycles. The firm believes that Tencent is one of the companies in the Chinese internet industry that can benefit the most from the advancement of AI applications, which will empower its entire business lines, including gaming, advertising, financial technology, cloud services, and e-commerce. Among them, the two core high-quality revenue sources—gaming and marketing services—have maintained over 20% year-on-year growth for three consecutive quarters, and they maintain a target price of HKD 770 The bank has revised down its capital expenditure expectations for Tencent in 2025 and 2026 to RMB 80 billion and RMB 100 billion (previously RMB 100 billion/RMB 117 billion), reflecting that under the constraints of external chip supply, the company is increasingly acquiring computing power through leasing (OPEX increases, CAPEX decreases). Management stated that GPU capacity is sufficient to meet internal demand.

Citi indicated that Tencent's gross profit, operating profit, and net profit for the third quarter grew by 22%, 18%, and 18% year-on-year, mainly benefiting from high-margin revenue sources such as self-developed games, video accounts, WeChat search, and cost savings from optimized efficiency, partially offset by strategic recruitment expenses for AI talent. Although capital expenditure in the third quarter decreased by 24% year-on-year due to the inability to obtain an ideal number of chips, this did not weaken Tencent's determination to upgrade its foundational large model architecture and develop agent-based AI capabilities internally within WeChat, believing that these investments will bring significant returns in the future, raising Tencent's target price from RMB 735 to RMB 751, reiterating a "Buy" rating, and maintaining its position as the industry favorite and AI investment target.

Daiwa noted that regarding AI capital expenditure, Tencent reported cash capital expenditure of RMB 20 billion in the third quarter of 2025. The company's management expects that the full-year capital expenditure for 2025 will be lower than the previously guided range of "low double-digit percentage of revenue," but still higher than the RMB 76.8 billion level in 2024, mainly constrained by chip supply limitations. The bank expects it will ultimately fall to a level equivalent to about 10% of the estimated revenue for 2025. Although management believes that GPU resources are sufficient to meet internal model training needs, the bank believes that limited chip supply hinders the growth of the cloud business.

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This report consolidates the latest investment ratings, target prices, and views on Tencent from 11 brokerages:

Broker│Investment Rating│Target Price

Jefferies│Buy│RMB 794

Bank of America Securities│Buy│RMB 780

Goldman Sachs│Buy│RMB 770

Nomura│Buy│RMB 757

Citi│Buy│RMB 731->751

Daiwa│Buy│RMB 750

BOCI│Buy│RMB 656->740

Citi│Highly Confident Outperform│RMB 740

Morgan Stanley│Overweight│RMB 700->735

CICC│Outperform Industry│RMB 700

JP Morgan│Overweight│RMB 685

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Broker│View

Jefferies│Revenue and profit expectations are favorable

Citi│Consolidating core business and developing AI agents Bank of America Securities │ Strong advertising business, gaming business meets expectations, capital expenditures decline quarter-on-quarter

Goldman Sachs │ All businesses stable and exceed expectations

Nomura │ Online gaming business drives revenue exceeding expectations

Daiwa │ AI integration drives advertising growth

BOCI │ Quarterly results exceed expectations, overseas gaming is surprising, continues to implement a robust AI strategy

Citi │ Gaming and advertising continue to exceed expectations, enhanced AI capabilities and ecosystem stickiness drive revenue growth

Morgan Stanley │ All performance metrics are stable

CICC │ Strong gaming, continuous layout in artificial intelligence

JP Morgan │ Performance solidifies