"Big Banks" JP Morgan: Tencent's core business remains resilient, and its stock price has not been excessively "AI premium."

JP Morgan published a research report stating that Tencent (00700.HK) still has resilience in the core engines of its WeChat ecosystem, advertising, and gaming business, and it is expected that the impact of artificial intelligence on stock price trends will exceed the expectations of profit increases. Compared to its peers, Tencent's generative AI layout is still in an earlier stage in terms of model demonstration and independent application momentum, as management prioritizes reliability, compliance, and ecosystem fit over scale expansion. This positioning means its stock price has not been excessively "AI premium," and if the company can demonstrate clear execution and product-market fit this year, it will create upward value.

Regarding Tencent's upcoming announcement of its Q4 2025 financial report, the bank expects the overall financial trend to remain on track, with the main point of contention being whether the weak macroeconomic environment will affect advertising and other cyclical businesses. Investors should pay attention to AI signals that can simultaneously influence market sentiment and fundamentals.

The bank expects Tencent's total revenue for Q4 to increase by 12% year-on-year to RMB 193.7 billion, in line with market expectations; adjusted net profit is expected to be RMB 65.6 billion, with an adjusted net profit margin rising by 2 percentage points to 34%; adjusted earnings per share are projected to be RMB 7.13. Additionally, the bank has lowered the company's adjusted earnings per share forecast for 2026 by 1%, maintaining a target price of HKD 750 and a rating of "Overweight."