AI investments surge as gaming and advertising drive growth.
Photo by Kuang Da
by Lu Keyan
Tencent reported a robust financial performance for the fourth quarter and full year of 2024, with revenue reaching 172.5 billion yuan (US$23.9 billion), up 11% year on year. Net profit jumped 30% to 55.3 billion yuan. For the full year, revenue grew 8% to 660.3 billion yuan, while net profit surged 68% to 194.1 billion yuan.
The results underscore Tencent’s steady growth across its core businesses—gaming and advertising—while its aggressive push into AI is taking shape. AI was a dominant theme in both the earnings report and analyst call, as the company increased capital expenditure significantly to support its long-term AI ambitions.
Tencent’s gaming segment, its traditional cash cow, remained a key growth driver. Revenue from value-added services, which includes gaming, rose 7% to 319.2 billion yuan in 2024. Gaming alone contributed 197.7 billion yuan, accounting for nearly 30% of total revenue.
Overseas gaming revenue climbed 9% to 58 billion yuan, supported by titles like PUBG Mobile and Supercell games, while domestic gaming revenue grew 10% to 139.7 billion yuan, led by Valorant, Naruto Online, and League of Legends: Wild Rift.
Tencent’s advertising business saw an even stronger expansion, with revenue rising 20% to 121.4 billion yuan, boosted by its upgraded ad technology platform, rapid growth in Video Accounts ads, and increased demand for mini-program and search ads. Video Accounts’ total user time grew significantly, with Q4 ad revenue jumping 60% year on year.
Meanwhile, Tencent's fintech and enterprise services business posted a 4% increase in revenue to 212 billion yuan, driven by growth in enterprise WeChat services and merchant tech fees.
WeChat continued to be a crucial growth engine for Tencent’s ecosystem. The platform integrated e-commerce functions across official accounts, mini-programs, Video Accounts, and its search engine, driving WeChat Shop’s gross merchandise value (GMV) to nearly double in 2024. Order volume surged 125%.
A notable new feature, the “Blue Packet” gifting service, has quickly gained traction. While Tencent has not disclosed transaction figures, merchants are already capitalizing on it. For example, live-commerce operator Oriental Selection saw gift orders account for 85% of total transactions in its WeChat shop, with over 50,000 orders placed on Chinese New Year’s Eve alone, generating more than 5 million yuan in GMV.
Tencent President Martin Lau said during the earnings call that the gifting function is contributing to WeChat’s e-commerce growth, as it improves user engagement and transaction success rates. “Once a new user enters their address through the gifting feature, their future purchase conversion rate in WeChat’s e-commerce ecosystem increases significantly,” Lau noted, calling it a foundational piece of Tencent’s broader e-commerce strategy.
Tencent is accelerating its AI push, ramping up spending and restructuring its teams. Earlier this year, the company moved its AI chatbot Yuanbao from the Technology Engineering Group (TEG) to the Cloud & Smart Industries Group (CSIG), alongside other AI-driven products such as QQ Browser and Sogou Input.
Across its ecosystem, Tencent is integrating large language models into various products, including Tencent Cloud, ima, Yuanbao, Tencent Docs, QQ Music, and WeChat. Even WeChat itself, historically cautious in adopting new product strategies, has begun small-scale AI testing.
This expansion has driven a surge in capital expenditure, which soared 221% year on year to 76.7 billion yuan in 2024. Spending accelerated sharply in Q4, up 386% to 36.6 billion yuan, largely due to increased GPU purchases for AI inference workloads. Tencent has also ramped up marketing for Yuanbao.
Lau confirmed plans to increase capital expenditure further in 2025, estimating that AI investments will account for a “low double-digit percentage” of total revenue, potentially pushing total spending past 100 billion yuan.
Tencent Chairman and CEO Pony Ma explained the company’s dual AI strategy—embracing both its in-house Hunyuan model and the open-source DeepSeek model. “We admire DeepSeek’s openness and efficiency,” Ma said. “China’s engineers have a cost and efficiency advantage, and we see our own model and DeepSeek as complementary, much like how we balanced self-developed and licensed games in the past.”
He also highlighted the potential of AI agents and robotics. While Tencent will not enter the hardware space, it aims to be a key partner for robotics firms.
Tencent’s aggressive push behind Yuanbao appears to be paying off. Daily active users (DAU) surged 20-fold from February to March, making it China’s third-largest AI-native mobile app by DAU. Speaking to Jiemian News, Lau acknowledged the heavy initial investment but said the company is closely tracking user retention. “Right now, the numbers look good,” he said, adding that Tencent aims to enhance features and integrate Yuanbao with other products to drive organic growth.
With AI now a strategic focus, Tencent is making clear that it sees the technology as its next big growth engine—one that warrants billion-dollar bets.
