騰訊控股2025Q3業績直播（即時傳譯）
Key Takeaways (AI-Generated)
Financial Performance
- Total revenue was 193 billion RMB, up 15% year on year
- Gross profit was 109 billion RMB, up 22% year on year
- Non-IFRS operating profit was 73 billion RMB, up 18% year on year
- International games revenue increased by 43% year on year
Business Highlights
- WeChat and Weixin combined MAU grew to 1.4 billion users
- Delta Force ranked top three games in China with 30 million daily active users
- VALORANT mobile became China's most successful mobile game launch year to date
- Hunyuan image generation model ranked first globally among text-to-image models
Financial Guidance
- 2025 total CapEx will be lower than previous guided range but higher than 2024
- International games growth rate expected to decelerate closer to underlying trend in Q4
Opportunities
- Continued international games expansion through acquisitions and partnerships
- Developing agentic AI capabilities within WeChat ecosystem for enhanced services
- AI adoption enabling teams to improve revenue and gross profit generation
- Constructive progress in discussions with Apple for mini games ecosystem
Risks
- Supply chain constraints on sourcing GPUs limiting cloud services revenue growth
- Subdued China consumer spending affecting payment business growth despite gentle improvement
Full Transcript (AI-Generated)
Operator
Good day and good evening. Thank you for standing by. Welcome to Tencent Holdings Limited 2025 Third Quarter Results Announcement Webinar. I'm Wendy Fang from Tencent IR team. At this time, all participants are in a listen only mode. After management's presentation, there will be a question and answer session for participants who dial in by phone.
If you wish to ask a question, please press 5 on your telephone to raise your hand. If you are accessing from the Tencent Meeting or Woo Meeting application, please click the Raise hand button at the bottom left. And please be advised that today's webinar is being recorded.
Before we start the presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent.
This presentation also contains some unaudited non IRS financial measures that should be considered in addition to, but not as a substitute for measures of the Group's financial performance prepared in accordance with IRS. For a detailed discussion of risk factors and non IRS measures, please refer to our disclosure documents on the IR section of our website.
Let me now introduce the management team on the webinar. Tonight, our Chairman and CEO, Pony Ma will kick off with a short overview. President Martin Lau and Chief Strategy Officer, James Mitchell will provide business review and Chief Financial Officer John will conclude this financial discussion before we open the floor for questions. I will now pass it to Pony.
Pony Ma
OK, thank you, Wendy. Good evening. Thank you, everyone for joining us. During the third quarter of 2025, we achieved solid revenue and earning growth, reflecting healthy trends across games, marketing services and fintech and business services.
Our strategic investment in AI are benefiting us in business areas such as ad targeting and game engagement, as well as efficiency enhancement areas such as coding and game and video production. We are upgrading the team and architecture of our Hun Yan Foundation model, whose image and 3D generation models are now industry leading.
As Hunya's capabilities continue to improve, our investment in growing Yuan Bao adoption and our efforts in developing a jet ticket AI capabilities within we Sing will gain further traction. Looking at our financial numbers for the third quarter, total revenue was 193 billion RMB, up 15% year on year.
Gross profit was 109 billion RMB, up 22% year on year. Non IFI's operating profit was 73 billion RMB, up 18% year on year. And non IFI's net profit attributable to equity holders was 71 billion RMB, up 18% year on year to our key services, core communication and social networks combined.
Mau of Weixin and WeChat grew year on year and quarter on quarter 1.4 billion. For digital content, TME Group is paying and APU solidifying its leadership position in music streaming. For games, Data Force is now the top three-game in China by gross receipt, while Violent successfully expand from PC to mobile.
And in AI, we enhanced the Hen Yuan large language models complex reasoning capabilities, especially in coding, masterpiece and science. Our Hen Yang image generation model is ranked first globally amounted to imaging models by LM Arena and our Wenya 3D model is the top ranked 3D generative model of parking base. I will now hand over to Martin for the business review.
Martin Lau
Thank you, Pony and good evening and good morning to everybody. For the third quarter of 2025, our total revenue was up 15% year on year. VAS represented 50% of our total revenue within which social networks sub segment was 17%, domestic games sub segment was 22% and international games was 11%.
Marketing Services was 19% of total revenue. And Fintech and business services was 30% of total revenue. What 1/4 Our gross profit was up 22% year on year to 109 billion RMB. Vast gross profit increased 23% year on year to 59 billion RMB, representing 54% of our total gross profit.
Marketing services gross profit increased 29% year on year to 21 billion RMB, contributing 19% of total gross profit. And fintech in business services gross profit increased 15% year on year to 29 billion RMB, contributing 27% of total gross profit.
Turning to business segments, value added services revenue was 96 billion RMB, up 16% year on year. Social networks revenue was up 5% year on year to 32 billion RMB, driven by increased revenue from video accounts, live streaming service, music subscriptions and mini games platform service fees.
Music subscription revenue increased 17% year on year, boosted by growth in APU and subscribers. Music subscribers grew 6% year on year two, 126 million. Long form video subscription revenue decreased 3% year on year. APU was stable, while video subscribers declined 2% year on year two, 114 million, due to the delay of drama series Love's Ambition following its release at the end of the quarter.
Finally, Love's Ambition ranked among the most viewed drama series in China year to date. Domestic games revenue grew by 15% year on year, primarily driven by Delta Force, Honor of Kings and Valorant. International games revenue increased by 43% year on year or 42% in constant currency, which is an unusually rapid rate due to recognizing revenue upfront on top of on copy sales of Dying Light The Beast and also due to the consolidation of recently acquired studios.
Moving to communications and social networks for mini shops. We're systematically building a more vibrant transaction ecosystem resulting in continued rapid growth in GFD with enhanced mini shop merchandise recommendations and thus sales conversions by leveraging my foundation model capabilities to better understand users interests based on their content consumption.
With innovation, we wrote out new features to enhance merchandise discovery innovation. For example, we added gifting capabilities innovation order and card page leveraging Invasion social graph. We'd also upgraded the image search feature innovation, which users can use to scan objects, identify them and then shop for them in mini shops.
We also enhanced AI features innovation to provide new services to users and to promote greater usage of Yanbao with encouraging results at Yanbao feature in video accounts and official accounts comment boxes summarizes content and also encourages users to ask follow up questions. And users like that feature a lot.
We also enriched the Tencent News feed in Weixin with Yuanbao generated content and facilitated user exploration of news related topics via the Yuanbao app. Now with that, I'll pass on to James.
James Mitchell
Thank you, Martin for domestic games. Honor of King's gross receipts grew year on year, benefiting from collaborations with the China Literature IPS, Lord of the Mysteries, and Fox Spirit Matchmaker. The game achieved 139,000,000 daily active users during its 10th anniversary event in October, which featured Hero and Minion outfits inspired by Bronze Age Shoe Kingdom artifacts.
Delta Force ranked among the top three games industry wide by gross receipts in the quarter, achieving over 30 million daily active users in September, including over 10 million daily active users on PC driven by new season content, extensive 1st anniversary events and a globally sports tournament.
We released VALORANT mobile on August the 19th and it's become China's most successful mobile game launch year to date based on its first month DAU and gross receipts. VALORANT PC continued to grow and achieved record high DAU and gross receipts in September benefiting from E sports themed weapon items.
The mobile launch resulted in Valorants combined monthly active users more than doubling from July's level to over 50 million in October. Among our international games for Clash Royale, Supercell released a new Auto Chess mode, Merge Tactics, and extended its Trophy Rd. achievement system to 10,000 trophies, driving higher player engagement.
Monthly daily active users and gross receipts achieved all time highs in September. Gross receipts increased more than 400% year on year during the third quarter. Gross receipts of PUBG MOBILE also grew year on year in the third quarter benefiting from ancient Egyptian themed outfits and innovative exit with Emode sound effects and the two player glider and collaborations with Transformers and Lotus Cars.
Our Polish subsidiary Tech Land released a new game in its Dying Light series called Dying Light the Beast, which has achieved a very positive average user review score on Steam and which contributed to our international game revenue growing unusually quickly during the quarter due to the upfront revenue recognition of copy sales.
The marketing services revenue increased 21% year on year to 36 billion renminbi, underpinned by ad spend growth from all major advertiser categories impressions through year on year as we enhanced engagement and increased ad load across video accounts, mini programs and ration search.
Average ECPM increased year on year as we upgraded our active foundation model with more parameters and captured additional closed loop marketing demand. We introduced our automated ad campaign solution, AI Marketing Plus, through which advertisers can automate targeting, bidding and placement as well as optimize ad creation, improving their return on marketing investment.
By inventory, video accounts, enriched content and transaction EPO system and it's upgraded recommendation algorithms drove stronger user engagement. Increases in DAU and time spent per user contributed to ad impression growth. Advertisers increasingly adopted our marketing tools to drive traffic to their short videos, live streams and mini shops.
For mini programs, increases in activations and time spent attracted ad spend for mini drama and mini games to promote their content And for Asian search, increases in commercial query volume and click through rates contributed to notable revenue growth.
We improved the relevance of search ads by upgrading our large language model capabilities and optimize some sponsored results to better match use of queries. Looking at Fintech and business services, segment revenue was 58 billion renminbi, up 10% year on year.
Fintech services revenue grew by a high single digit percentage primarily driven by commercial payment services and consumer loan services. For commercial payment volume, the year on year growth rate was faster in the third quarter than the second quarter.
Online payment volume continued to grow robustly while offline payment volume improved particularly in the retail and transportation categories. For consumer loan services, our non performing loan rates remained among the lowest in the industry and improved year on year reflecting our prudent risk management practices.
Turning to Business services, despite supply chain constraints on sourcing GPUs revenue grew at a teens rate year on year in the third quarter, benefiting from higher cloud services revenues and increased technology service fees generated from rising mini shops e-commerce transaction volumes.
Revenue from our cloud storage and data management products, namely cloud object storage, TC House and Vector DB grew notably year on year due to increased demand, including from leading automotive and Internet companies. And for Wicom, we launched an AI summarization feature to generate project recaps and provide advice based on users emails and conversations, enhancing project collaboration efficiency. And I'll now pass to John for the financial review.
John
Thank you, James. For the first quarter of 2025, total revenue was 192.9 billion renminbi, up 15% year on year. Gross profit was 108.8 billion renminbi. Up 22% year on year. Other gains were 0.5 billion renminbi. With other gains of 3 billion RMB in the same period last year mainly.
Due to lower subsidies and tax rebates, as well as provisions paid for some receivables. During the quarter, operating profit was 63.6 billion RMB, up 19% year on year. Interest income was 4.3 billion RMB, up 7% year on year, driven by growth in cash reserves.
Finance costs were 3.8 billion RMB, up 6% year on year due to forex movements and high interest expenses, share profit of associates and JV. 7.8 billion renminbi with 6 billion renminbi in the same quarter last.
On a non IRS basis, share profit was 10 point. 3 billion renminbi, up from 8.5 billion renb in the same quarter last year. By associate company specific factors including business growth and improved operational efficiency.
Interest tax expense increased by 10% year on year to 9.8 billion renminbi, mainly driven by operating public growth. On 9 IRS basis, diluted EBS was 7.575 Renminb, up 19% year on year old pacing non ivirus network forward growth due to reduced share count of the our share buybacks.
A weighted average number of shares which we use for calculating quarterly diluted. EPS decreased by 1% year on year on non ivars financial. Figures operating probably was 72.6 billion ramby, up 18%. Year net profit attributable to equity holders was 17.6 billion RMB, up 18% year on year.
Moving on to gross margin. Overall gross margin was 56%, up three percentage points. By segment, vast gross margin, 61% of 4 percentage points year and year, mainly driven by greater contributions from certain internally developed. High Margin Games
Marketing Services Gross margin was 50. 7%, up four percentage points year and year due to higher contributions from high margin revenue. Including video accounts and wasting search, fintech and business services, gross margin was 50%, up two percentage points year on year due to improved revenue. Mix within fintech services
On third quarter operating expenses, selling marketing expenses were 11.5 billion up. 22% year on year, reflecting increased promotional efforts to support the growth of our AI native applications and games. R&D expenses rose by a 28% year on year to 22.8 billion RMB, primarily due to higher staff costs and increased infrastructure investment to support our AI initiatives.
GNA excluding R&D expenses increased by 2% year on year to 11.4 billion RMB. At quarter and we had approximately 115,000 employees, up 6% year on year or 3% Q on Q. Primary reflecting headcount additions for both games and our technology platform, including AI related headcount.
Our first quarter non I virus operating margin was 38 percent. 1A. One percentage point year on year operating CapEx was 12 billion renminbi, down 18% year on year primarily due to supply chain changes. Non operating CapEx was 1 billion renminbi, down 59% year on year.
Refracting higher base last year rated to construction. Free cash flow was 58.5 billion renminbi, largely stable year on year as operating cash flow growth was offset by high capax payment. On 1/4. On quarter basis, free cash flow was up 36% due to high games gross receipts.
Net cash position was 102 point billion renminbi, up 37% Q on Q or 27.8 percent, 27.8 billion renminbi, mainly driven by free cash flow generation partially offset by share repurchase as well 19.2 billion renminbi. Thank you.
Wendy Fang
Thank you, John. We are now opening the floor for questions. If you are dialing in by phone, please press 5 to raise a question and then press 6 to unmute yourself. If you are accessing from the 10 Cent meeting or Wu meeting application, please click the raise hand button at the bottom.
We will take one minute. Question and up to 1 follow up question each time the first question. Comes from Leo Yuan from Citi.
Leo Yuan
Good evening, management. Thanks for taking my question and Congrats on the strong results. My first question is about your gaming business, Your international gaming business growth rate has been accelerating for multiple quarters. So just want to know what have you done right to achieve such good results and how should we think about the growth trend going forward?
Besides, could you share more thoughts on your international gaming strategy, for example, where you continue investing high quality overseas game studios or bringing more self developed games to global markets? And my second quick question is about your CapEx.
And this quarter CapEx was around RMB 13 billion RMB, but the cash payment for CapEx was RMB 20 billion. So how should we interpret the difference between these two figures? And is there any new update to your full year CapEx guidance? Thank you,
James Mitchell
Great. Why don't I start with the questions around games and you know, the growth rate of the international game business, the strategy for the international game business. So the growth rate that we reported for the quarter for the international game business is, you know, substantially faster than the underlying trend line.
And that's because during the quarter we had the benefit of consolidation of newly acquired or recently acquired game studios as well as the benefit of the upfront revenue recognition on copy sales for the game Dying Light The Beast.
So going forward in looking into the fourth quarter, you should expect the growth rate for the international game segment sub segment to decelerate closer to the underlying trend line. In terms of the strategy for our international game business, you know yes to to the drivers that you mentioned.
We'll we'll continue seeking to acquire game studios, we'll continue seeking to partner with overseas game studios and we'll continue seeking to bring more games that are made in China to a global audience as well.
John
In terms of cutbacks, the difference reflect timing gap between the accrual of server related expenditure and cash payment, which can cause temporary mismatches between the two. In particular, the credit period for us to pay server suppliers is usually 60 days.
In terms of the CapEx for 2025 to share with you, in 2024, our total CapEx grew by 221% year on year and was about 12% of the revenue previously. For 2025, we guided total CapEx. Was as a percentage of revenue to be at low teens for.
And the 2025 CapEx will be lower to our previous guided range, but amount will be higher than that of 2024. Thank you.
Wendy Fang
We will take the next question from Alicia Yap from Citigroup.
Alicia Yap
Hi, can you hear me OK? Yes, OK. Hi, good evening. Thanks for taking my questions and also Congrats on the solid results. First questions, can management elaborate about your comment on the upgrading Hen Yuan team and also the Hen Yuan infrastructure?
What should we be expecting to see from the upgraded version? And then does management have any updated view on how Yuan Bao might compliment the AI capability that you have embedded into the wasting ecosystem the past few months?
And then second questions is on your advertising marketing service revenue. So that's that automated ad campaign solution, the AIM Plus better serve the smaller advertiser. Should we expect the solution to drive broader adoption rate for advertiser and Dr. higher ROI spending that support potentially accelerations of the ad revenue growth in the coming quarters? Thank you.
Martin Lau
Yes, in terms of the Huan Yuan team and the Huan Yuan architecture, we are actually hiring more top notch talent, especially in the research area in order to complement our existing strong engineering team. And you know they are complementary to each other.
And we have also been improving the Hen Yuan overall architecture across different dimensions, such as improving the hardware and software infrastructure in order to support better data preparation to support better pre training of the model, as well as to support reinforced learning across different knowledge domains at scale.
So, you know, these are the the improvements that we are making more specifically on the when you and team as well as the when you and architecture. Now in terms of how Yuanbao and Weixin complement each other, you know, I would point to the fact that Weixin has actually introduced a number of AI features based on Yuanbao's capability.
For example, you know in the prepared comments we actually talk about the add to Yuanbao feature in video accounts and official accounts comment box which allows you. To ask you about to summarize the content so that they can actually have. Very quick reference and it actually encourage a lot of interesting additional follow up questions and follow up comments based on the the the summary of what Yunbao provided.
And we are also enriched the Tencent news feed in Weixin with Yunbao generated content and you know allowed a lot of users to use that as a way to explore more news content, related news content as well as ask questions on the news content.
And we are actually adding more and planning to add more functionalities of UN Bao intuition so that those functionalities actually, one, serve the Weixin users better and two, actually help Yuan Bao to gain a larger audience.
And more and more these audience find Yuan Bao's capability through Weixin and eventually become a Yuan Bao app user. So, you know, that's sort of complementary to each other
James Mitchell
and Alicia, in terms of the A+ automated ad campaign solution. And we believe the automated ad campaign solution benefits all advertisers who deploy it by enabling them to automatically reach inventories as well as user profiles that are more performant than the inventories and user profiles they were manually targeting.
You're right to say that small and medium sized businesses are the 1st or the the most eager to adopt this kind of product because they have the least legacy process to replace. And that's what we're experiencing right now. But we're also seeing bigger advertisers adopting AIM +2 that parallels the experience of Meadows Advantage Plus automated ad solution overseas. Thank you.
Wendy Fang
Yeah, Adisha, we will take the next question from Gary from Morgan Stanley.
Gary
Hi, thank you management for the opportunity to ask question. My first question is a follow up on Yuanbao and Wei Sin. It appears that both the Yuanbao adoptions and also and genetic AI functional Wei Sin hinder on foundation model capabilities, but yet CapEx spending remains slowed according to you know, latest comment.
So is there a risk that you know, the company is not aggressive enough such that the potential, you know, AI application market could be lost to other companies who have either, you know, better model capabilities or more aggressive CapEx spending?
And my follow up question is regarding some of the expense item selling and marketing and RN. So when should we expect some of the internal AI adoption to benefit on cost efficiency in order to offset some of the, you know investment that we have talked about on yuan Bao and game advertising? Thank you.
Martin Lau
Yeah, in terms of Yuan Bao adoption and also you know, the, the CapEx spending at this point in time, we we actually believe that there's no insufficiency of, of GPU's for us at this moment. You know, it's you know our all our GPU's you are actually sufficient for our internal use and you know, there is some limiting factor for external cloud revenue now
in terms of the Yuan Bao capability. And, and when you have model capability, as you know, I talk about to Alicia's questions that we are actually making a lot of improvement in terms of our team, in terms of our talent recruitment and in terms of our, when you're an infrastructure and the overall process of, of, of the hen Yuan research.
And I would say we're actually happy with the progress we have made already. And you know, if you wait a little bit for our next model, you can see meaningful improvement in terms of the hen yuan capability.
And I believe, you know with the new improvements that we've been making, we'll continue to pick up pace on the the hen yuan capability. And at this point of time, we actually do not believe that there is a decisive better model in China as everybody is actually locked in the pretty close race and different models may be different, maybe you know better, you know in different use cases as well.
So we, we, we don't believe we are really, you know, behind and, and you know, as we continue to improve our when Yuan capability and, and you know, we, we actually have been also seeing quite a good ramp in terms of Yuanbao engagement.
So you know, I think you know you, you see both the model capability as well as you know our AI products keep on improving. Now in terms of the expenses, I think at this point of time the GNA expense, you know, especially the R&D is actually, you know, some of that is related to our AI investment.
So you know, there's a natural ramp up because you invest more in AI and if you look at the benefits of AI, you know at this stage a lot of the efficiency gains are more on the revenue side and the gross profit side. So you see, you know pretty good growth in those items.
But in terms of the cost item, I would say we have already done pretty big organization optimization a few years back. And the organization that we have is actually an efficient and AI adoption actually allows our team to do more as well as instead of to, you know, reduce cost, which I think some other companies you're probably comparing with. Thank you.
Wendy Fang
We will take the next question from Alex Yao from JP Morgan.
Alex Yao
Thank you, management, for taking my question. Congrats on a very strong quarter. And also thank you for playing very smooth and relaxing music before the call. I will ensure I watch this TV drama after the earnings season.
So 2 questions from my side. First one, you mentioned that Tencent is developing A genetic AI capabilities within Weixin in the prepared remark. Can you share your thoughts about how will agentic AI creates value to consumers in Weixin? I'm particularly interested in your thoughts around agentic commerce.
Second one is on CapEx. Did did I hear, John Ryan, the the CapEx for 2025 will be lower than the previous guidance, but higher than the 24 actual CapEx spending. If I get that right, does it reflect a change of AI chip availability or a change of AI investment strategy or a change of your expectation of a future token consumption? Thank you.
John
Yeah. On your second question, the answer is you heard it right and it's not a reflection of our change in AI strategy. It's not a change in terms of expectation of future token consumption. It is indeed a change in terms of the AI chip availability.
Martin Lau
Now, in terms of the agent AI capabilities right now, I think the blue sky scenario is that, you know, eventually Weixin will come up with an AI agent that actually can help the user to essentially do a lot of tasks within AI within Weixin, you know, leveraging AI, right, You know, because, because if you look at the ecosystem of Weixin, it has a very strong communications and social ecosystem and it has a lot of data that allows the agent to understand about the user's needs as well as the intentions and interest.
You know, it has a very strong content ecosystem in the form of official accounts and video accounts. It has, you know, mini program ecosystem, which essentially include most of the use cases on Internet. It has a commerce ecosystem, which allows people to buy stuff and the payment ecosystem, which actually allows people to pay for it almost immediately.
So that is, you know, almost, you know, ideal assistant for users and you know, understands about the user's needs and can actually perform all the tasks within the ecosystem. So that's the blue sky scenario now I think you know how how do we get there right?
You know it it at this point in time, it's actually very early stage in terms of development waiting is doing a number of things in parallel. For example, it's. Introducing remember. Capabilities into Weixin so that, you know, we can test out a lot of the AI. Features on a stand alone basis with innovation
it's also enhancing. Search with AI so that we can serve the users search and information collecting as well as analysis needs more efficiently. We are also starting to work on vertical agentic capabilities and that's something that, you know, we're working on.
We have not launched these yet, but then they're very likely we'll be sort of working on functionality 1 by 1. But eventually, you know, we can actually sort of, you know, integrate all these agentic capabilities as well as the AI features so that we can actually create this blue scenario of waging agent.
I think in terms of agent to commerce, right? I think you know when there's the agent side and there's the commerce side, you know the commerce, we're actually making very good progress in terms of building up our e-commerce ecosystem and and the mini shop is actually growing very nicely in terms of GMV, you know over time as it continue to grow, right, You know, and as we work on the vertical agents, right, you know at some point of time we will have agentic e-commerce as well, but that's you know a bit later in the process. Thank you.
Wendy Fang
We will take the next question from William Packer from X&B&C. William, your line is open.
William Packer
Hi management, Congrats on the strong quarter and thanks for taking my questions. Firstly, Bloomberg have reported today that you've come to terms regarding a 15% Commission with Apple within the WeChat ecosystem below their usual 30%.
While you probably prefer not to talk about the specifics of the press article, could you help us think from the implications of your improving relationship with Apple and the impact on your business, particularly mini games and domestic video games?
And then secondly, it's follow up, Q3 was another very good call to the marketing services with revenue growth accelerating, could you help frame the growth outlook in the shorter term of the 2026 and any new structural cyclical factors to consider? Thank you.
Martin Lau
Well, in terms of your Apple right now, what what I could say is that a number one, we have a very good relationship with Apple and we have sort of collaborated on a lot of different areas and we have been in discussion with Apple to make the mini game ecosystem more vibrant and you know, we you know constructive with the progress that we made.
So far and I think you know at some point in time, but there may be, you know, an official announcement. I think, you know, everybody should wait for that.
James Mitchell
And in terms of the advertising growth outlook, you know, we think that it's largely a continuation of current trends. Overall China consumer spending is subdued, but but gently improving, which is a gentle tailwind for advertising spending on the, the, the demand side.
And then in terms of, you know, the, the, the supply that we provide, we'll continue deploying more AI capabilities, including the AIM Plus program automated ad campaign program that I referred to earlier. Thank you.
Wendy Fang
We will take the next question from Shalin Liu from C
Shalin Liu
Thank you very much for the opportunity. I think a quick one on R&D spending, especially as a percentage of revenue, how do we expect that to trend in the near and medium term? And then separately, we've seen really good GPM optimization at the segmental level.
How should we think about over impact to OPM taking into consideration potential uptick in AI investments, depression costs and whatnot? Yeah, so those two, we wanted to kind of see how that that margined net impact was sort of play out in the medium term. Thank you so much.
James Mitchell
But why don't I take the gross profit margin question And you know, first of all to clarify, while the gross margins of our various segments have been trending upward over time, you know that's not purely or even primarily due to to sort of optimization efforts per SE.
You know, there are some sub segments such as cloud where you know, we we have taken a number of measures to optimize profitability and that has flowed through into higher gross margins in the last two years. But for most of our segments, the improvement in gross margins is more a function of the positive mixed shift toward higher quality revenue streams that, you know we've talked about a number of times in recent quarters.
In terms of the dynamic between gross profit margin and operating profit margin. You know, I would not put too much weight on that quarter to quarter because you know there are, you know, costs which at an early stage in a products development cycle we would expense under R&D and therefore come, you know, below the gross profit line.
But then as we actually make the product more widely available, commercialize the product, we would move the costs from R&D expense into cost of service and therefore above the the gross profit line. So I would probably focus more on, you know revenue growth, operating profit growth without getting too fixated on gross profit margin versus operating profit margin. Thank you.
Wendy Fang
We will take the next question from Candice Ball from UBS. And is your line is open you need to unmute yourself.
Candice Ball
Hello, we can hear you now. Go ahead. Hey, Congrats on a strong result and thanks management for taking my question. I have a questions about the investment strategy. Given the strong equity market performance here today globally, could management share some thoughts on our investment portfolio and strategy and direction? So basically how should we deploy or recycle our capital? Thank you.
James Mitchell
Yeah, hello Kenneth. So you know, as you point out, markets have been quite buoyant both in terms of price and in terms of liquidity. And so we've been taking advantage of that buoyancy to more actively recycle our portfolio primarily via, you know some on market sales of our investment holdings.
We've also been new investing in some emerging growth opportunities as well as our normal sort of focus areas such as games and digital content. But overall, year to date, divestments have exceeded investments by over a billion dollars and we've been, you know, actively investing in some interesting AI start-ups, particularly in China where we can see a sort of new wave of value creation ahead. Thank you very much, James. Thank you.
Wendy Fang
We will take the next question from Ronald Kwong from Goldman Sachs. Ronald, your line is open. You can unmute yourself. Ronald, Ronald from Goldman Sachs, maybe we go to the next question if Ronald is not online. So we will take the next question from Robin Zhu from Bernstein.
Robin Zhu
Thank you. Hi, management, thanks for taking my questions. I guess 2 questions on gaming please. 1 is, you know, if we look at the shooter genre, I think there seems to be a bit of a changing of guard with Battlefield. Delta Force, you know our creator is not doing quite well.
Would be curious your thoughts on, you know, what you think is happening at the drama level and for Delta Force specifically, what it would take what's being planned to get the game from #2 and #3 closer to the top two games. Is it realistic to expect that that happens at some point or or not?
And you know, I guess to follow up on an earlier question on the mini games developments, you know, be curious if you could try and dimension some of the relative contributions of in app advertising versus in app purchases on Android right now.
And whether we think that this discussion going on with Apple is primarily on mini games has has been reported or, you know, is there a broader discussion going on about or could potentially go on about, you know, the broader games business as a whole? Thank you.
James Mitchell
Hi, Robin. So in terms of, you know, what's happening with first person action games, then, you know, outside China, as you say, there may be a a changing of the guard, you know, within China. I think that, you know, Delta Force has obviously been performing gratifyingly well, but you know, Valorant has had an exceptionally strong year.
And then, you know, Peacekeeper Elite Arena Breakout, you know, Crossfire mobile, pretty much all of our first person action games have actually been growing DAU or growing monetization or or mostly both during 2025 year to date.
So you know, to me that's not really a changing of the guard. It's more a expansion of the Royal Guard, if you will, which, you know, I think speaks to the fact that first person action games, the leading game genre in the rest of the world.
They're not yet the leading game genre in China, but you know, with Delta Force and Valorant and Peacekeeper Elite and the rest, we're seeking to bring them to the position that they should enjoy in terms of, you know, growing Delta Force further.
Then, you know, we're really embracing platformization with our biggest games. And in a Delta Force, unusually, is sort of built from day one to support platformization in terms of, you know, it's modularity. You know, with more platformization, we can also support more new modes.
And then, you know, one of the new modes that has done very well, well in in Peacekeeper release and in PUBG MOBILE. And you know, over time, we'll seek to nurture in Delta Force is user generated content.
And then we'll continue to, you know, add player versus environment content. We'll continue to strengthen the streamer ecosystem and you know, generally apply the experiences that we've accumulated over, you know, 17 years of launching 41st person action games in China to Delta Force.
And then on your second question, you know, the the stories report, the stories refer to, you know, mini games, not to app based games. And you know, at this point the majority of the mini game revenue is in app purchase rather than in app advertising, so would theoretically benefit. Thank you.
Wendy Fang
Thank you. We will take the next question from Thomas Chong from Jefferies.
Thomas Chong
Hi, good evening. Thanks management for taking my question and congratulations on a very strong set of result. My question is on the FBS side. Given that we are emphasizing more on the consumer loan side, I just want to get some color with regard to the macro environment.
Is this a factor that we need to take into consideration about our consumer loan revenue growth and we look into our cloud revenue, How should we think about the growth rate going forward? Should we take into account the CapEx spending or should we expect the growth may decelerate because of less CapEx? Thank you.
Martin Lau
So in terms of the FBS, particularly with respect to Fintech, I think. If you look at the Fintech, you know there are three major businesses within Fintech 1 is our payment business. The second ones wealth management. The third one is loans, right?
And in, in terms of macro environment, macro environment sort of, you know, has the biggest bearing on the payment business because payment business is already very big And it, it, it tracks pretty closely with, you know, consumption growth in China.
And you know, there was a time in which the consumption growth is actually in more challenging state. I think, you know, over time it's, you know, gradually improving and what, what we we see is, you know, in China, you know, the consumption growth has been slow.
And it's mainly due to the fact that, you know, a lot of consumers ramp up their, their savings during a period in which, you know, their, their balance sheet was actually sort of dragged down by the decline in property prices.
So unlike a lot of the other economic downtrends around the world, which are driven by, oh, you know, excessive credit and and a lot of people sort of knew would go bankrupt, right? You know, in China, it's just sort of new people have resources, but then they, you know, decide to stay, save more instead of spending more.
We actually sort of need, you know, so that's why we think there is actually potential for consumption to grow. If people start to feel that, you know, they're secure now, you know, with the additional savings. And at the same time, if your property prices stop declining, I think, you know, people will probably, you know, begin to spend more.
I think, you know, this year we've seen stock prices have been sort of, you know, pretty strong and that adds to the household balance sheet and and that is, you know, slightly a positive factor. And at the same time, if you look at consumer loans, right, you know, because you know, people are not stretched from a balance sheet perspective, they're just sort of saving more.
It's not actually sort of affecting consumer loans delinquency that much. And by the way, then we we have been sort of, you know, very self constraint in terms of extending loans, in terms of loan amount and also because of the data that we have, right.
You know, I think, you know, our underwriting is actually very conservative. You know, very data-driven and delinquency is, you know the. Among the industry leading, so that's you know essentially on the fintech side.
In terms of cloud business, I think we have been increasing our revenue. You know, finally, sort of, you know, this year, right, you know, in the past few years, you know, our revenue has not grown that much, but our gross profit has grown very significantly.
And this year, you know, we're growing both the revenue as well as the gross profit and, and the, the business is actually sort of profitable. You know, 1 constraint of of cloud business growth is availability of AI chips because you know when, when AI chips actually in short supply, we actually prioritize internal use as opposed to renting it out externally.
And the other way to say is if there is not an AI supply constraint, then our cloud revenue should be growing more quickly.
Wendy Fang
We will take the next question from John Choi from Daiwa.
John Choi
Thanks for taking. My question, I just want to quickly follow up on the advertising business. I think you know on their. Strong quarter as you said, but I think last quarter management mentioned that you know it was more due to AI, you know implementation.
But for this quarter, can you kind of elaborate a bit more how you know impact from AI and how that has reshaped the overall conversion and pricing for our ad business? So if you take that out organically, what could what kind of growth could have you seen?
And also just on the quickly a quick follow up on the payment side, I think you know, Martin just mentioned that you know, the overall household spending, you know, it has a high relation, but you also I think I mentioned the retail and transportation category has done well on the you know, volume growth, especially on the grassroots side.
Have we noticed any trends that we are seeing on industry specific levels and in terms of the transactions or the you know, transaction size that you know gives us more confident that you know over the past couple of quarters to see the improvement trend? Thank you.
James Mitchell
Well, why didn't I take those? In terms of the advertising revenue, roughly half of the growth or about 10 points was due to higher ECPM, which would contribute primarily to AI supported ad tech as well as to close loop benefits.
And then the other half was due to increased impression volume, which reflects increased user engagement and increased ad load. In terms of the commercial payment volume trends, then you know that there is a measured improvement.
As Martin spoke to, it's, you know, positive that China consumers have accumulated substantial savings of trend savings in recent years. So they may be less worried by property price fluctuations and, you know, more receptive to the stock market performing well than would otherwise be the case by given this substantial pent up spending power.
And you know, we have seen that the online payment volume, you know, has continued to grow quite steadily, you know, through the the weaker periods and now through this more stable period. But the offline payment volume, which had been very suppressed and under pressure for a period of time has also started to recover.
So while online payment volume is growing faster than offline payment volume, the gap has been narrowing as offline payment volume has improved, you know, in categories including transportation and and retail, which I suppose reflects people going out and about more often. Thank you.
Martin Lau
But I have to stress such improvement is still pretty nascent. So, you know, we we actually need to see it for a few. More months in order to sort of, you know, have more confidence. And say this is a trend. Thank you.
Wendy Fang
We will take the last question from Ronald Kwang from Goldman Sachs.
Ronald Kwang
Thank you for the technical. I have a question on advertising, just follow up being on I want to hear how the AI marketing plus product. Many early data points on the on the performance and ROI for merchants on that.
And I also see you mentioned mini shops in one of the early, very early bullets in the in the results. So could you? Quantify the the potential of that ad potential that I'm particularly looking. For the, for the increasingly vibrant mini shop transaction ecosystem, the ad potential there.
And then my second question, just want to ask about the, the, the, the, the analogy from our Asian and QQ because we have seen Facebook and Instagram kind of serving different cohorts within the company and we have been serving those with Asian and QQ as well.
Any parallels and differences? How we see Weixin as our key product. But also potentials for two, two different products serving cohorts within domestic China. Just an open question. Open. Ended question, thank you.
James Mitchell
But why don't I start with the question around AIM Plus? So, you know, when you introduce this automated ad campaign system, you know, the, the biggest sort of leap for the advertisers is, you know, allowing us as the platform operator to actually manage the bidding process on their behalf.
And you know, of course that there's a degree of internal, you know, conservatism within the bigger advertisers as to, you know, whether to entrust the platform to manage the price or not. And, you know, typically the larger advertisers will run the automated and the manual processes in parallel for a period of time and compare the ROI to verify whether the automated process, you know, is delivering more performance or not.
And you know with turned on that automated bidding tool relatively recently, but you know the early results are positive. Those advertisers who are adopting the automated solution are are enjoying superior returns. And therefore the percentage of our advertisers and the percentage of our advertising spending that is going through AIM Plus is steadily increasing.
And in terms of the mini shops then you know, I think you can benchmark, you know, the, the advertising to GMV ratios of the incumbent e-commerce marketplaces in China across to the, you know, GMV for mini shops, which is growing very quickly. And you know, that will give you a sense of the advertising revenue potential from the mini shop operators. So that's on the advertising question,
Martin Lau
yeah, in terms of Weixin and QQ, you know, and then sort of analogy for for rest of the world, for example, sort of, you know, Facebook and and Instagram, I think it's a very interesting question. And I think, you know, there's some fundamental differences, right.
You know, in the sense that number one, if you look at Instagram and and Facebook, they are primarily social networks, right? And, and if you look at Weixin and QQ, they are both communication network and social network.
So if you have social network and it's sort of it's content based, then it's actually easier for you to have different groups of people dialing in and and reading different content versus it's communication. Then you know, the network effect of communication platform is actually sort of stronger.
And, and the other thing is, I know China is it is much more mobile oriented versus I think, you know, the rest of the world. There's still a lot of people who are using PC and you know, if you're PC then you know, Facebook seems to be sort of you're having more PC users.
And I think, you know, thirdly is, you know, if you compare Facebook and Instagram, right, Facebook tends to sort of, you know, keep the, the more mature users and Instagram sort of, you know, more younger people.
But you know, in, in China, it's actually different between Asian and QQ, right? You know, the QQ users are primarily sort of, you know, younger in nature. So, so I think, you know, there is some fundamental differences, but at the same time, you know, Weixin and QQ are serving different user group and different use cases.
You know, a lot of the younger people also have Weixin, but then, you know, they use QQ so that, you know, they would not be seeing, you know, their parents and, and their teachers and some people younger people would not be seeing their colleagues.
And so, you know, I think you're going forward when we continue to evolve QQ as a product, right? You know, then, you know, we, we should actually latch onto these, you know, features and these user needs and sort of, you know, make it more fun, make it, you know, very differentiated from Weixin.
Weixin probably something you'll serve, you know, all-purpose, whereas sort of, you know, QQ will serve the younger people, more active people. And we we should sort of, you know, try to provide a lot of functionalities. You can meet new people, you can sort of, you know, serve more of your interest based groups.
And and I think you know that that's the way we are going to be differentiating QQ and Wayshare and you know, make sure that you know this. Serve our users in different use cases and scenario. Thank you.
Wendy Fang
We are now ending the webinar. Thank you all for joining our results webinar today. If you wish to check out our press release and other financial information, please visit the IR section of our company website at www.tencent.com.
The replay of this webinar will also soon available. Thank you. And see you next quarter.
Details at Tencent IR
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