AI TRENDS | Tencent's Q1 Performance Driven by Core Gaming and Marketing, AI Investments Impact Short-Term Margins

On April 13, Jin10 reported that a research note from CMB International anticipates Tencent's first-quarter performance this year to be stable, with total revenue expected to grow by 10% year-on-year to 198.4 billion yuan. According to Jin10, the non-IFRS net profit is projected to increase by 9% year-on-year to 66.8 billion yuan, primarily driven by robust core gaming and marketing activities, although partially offset by increased AI investments. The firm noted that Tencent's core business continues to benefit from AI, maintaining strong growth momentum. While AI investments may impact short-term profit margins, they also create short-term catalysts and empower core business in the long run. Following last year's fourth-quarter results, the firm believes the market has overreacted to potential AI threats and the short-term margin pressure from AI investments, making Tencent's current valuation attractive. The target price remains at 750 HKD with a 'buy' rating.