(Bloomberg) — Tencent Holdings Ltd. outlined plans to sharply raise spending on AI infrastructure after posting its fastest pace of revenue growth since 2023, showing that China’s most valuable company is intent on keeping pace with rivals in the post-DeepSeek era.
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Revenue rose a better-than-projected 11% to 172.5 billion yuan ($23.8 billion) for the three months ended December, while net income almost doubled. The company also unveiled plans to buy back at least HK$80 billion worth of shares and proposed a 32% hike in its annual dividend for 2025. Shares in Prosus NV, a major shareholder, climbed more than 2% in Europe.
Tencent sketched out a more measured approach to artificial intelligence than arch-foe Alibaba Group Holding Ltd., which last month declared it was going all-in on AI development. Billionaire founder Pony Ma described how Tencent made the “careful consideration” to rely on both in-house and open-sourced models — in much the same way it publishes both its own and third-party games.
Tencent intends to commercialize AI by beefing up services such as advertising and WeChat, while spending on research to keep pace with Alibaba and DeepSeek, whose emergence in January galvanized global AI development. Tencent plans to devote a low-teens percentage of its 2025 revenue toward capital expenditures, including on AI infrastructure — more than $10 billion, based on analysts’ projected sales this year.
“AI is actually in a very early stage, so it’s really hard to talk about what the eventual state would look like,” President Martin Lau told analysts on a post-results briefing. But each of Tencent’s consumer-facing applications “will continue to evolve into a very useful and even more powerful product to users.”
Tencent ramped up its purchases of AI chips in 2024’s final quarter to serve increased demand, which should translate into faster cloud revenue growth, executives said. The company is working around US restrictions on the most powerful Nvidia Corp. semiconductors. Chief Strategy Officer James Mitchell said DeepSeek however has demonstrated how it’s possible to achieve breakthroughs for less, and Tencent itself was prioritizing “high-value” use cases.
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Tencent is among the major Chinese tech names to report this week, wrapping up a closely watched earnings season for a trillion-dollar sector that’s rounding a corner.
President Xi Jinping last month met with prominent entrepreneurs including Tencent chief Ma and Alibaba co-founder Jack Ma, signaling Beijing’s softening stance toward a private sector it assailed over three years. Also in attendance were a new generation of founders representing industries like chipmaking, electric vehicles and AI, echoing Xi’s priorities during a tech face-off against the US.
That symposium came just weeks after Hangzhou-based DeepSeek launched a model that rivals OpenAI’s while needing much less computing resources.
The Chinese startup’s R1 has triggered soul-searching among Chinese tech giants, who’re now ramping up the release of similar model upgrades or raising investments in AI infrastructure. Alibaba made one of the most dramatic moves by pledging to spend more than $50 billion on its AI and cloud computing networks over the next three years. The e-commerce pioneer’s CEO declared that artificial general intelligence — human-like AI capability — is now its “primary objective.”
Tencent gained roughly 30% or $140 billion in market valuation so far this year, helped by a broader Chinese tech rally induced by the rise of DeepSeek. But that lags behind a 70%-plus jump in shares of arch-rival Alibaba, whose Qwen model underpins one of the country’s more popular AI services.
What Bloomberg Intelligence Says
Tencent’s unchanged focus on leveraging artificial intelligence internally, especially in ads and video games, stands a higher chance of generating an immediate payback than its peers. Tencent’s 4Q outlook statement lacked the Big Bang approach to AI seen from Alibaba, which is more focused on cloud computing and less certain long-term opportunities in artificial general intelligence (AGI). Tencent confirmed it had reorganized its AI teams to sharpen its focus.
– Robert Lea and Jasmine Lyu, analyst
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Tencent is playing catch-up. It integrated DeepSeek’s open-sourced models into services including WeChat search and its chatbot Yuanbao, which briefly became the country’s most downloaded free app on iPhone. With Peacekeeper Elite, one of Tencent’s two biggest gaming titles, DeepSeek forms the foundation of a new virtual assistant that teaches players how to shoot. On Tuesday, it released AI services that turn text or images into 3D visuals and graphics, potentially streamlining the often lengthy and costly studio development process.
“Tencent has historically caught up at a later stage, narrowing the market share gap or even surpassing the first mover, backed by its unique WeChat ecosystem,” Goldman Sachs analysts including Ronald Keung wrote in a note before the results. Super-apps like WeChat and ByteDance Ltd.’s Douyin are best positioned to tap into AI application or agent opportunities, they said.
With a billion-plus users, WeChat remains Tencent’s most dependable asset as it takes on a bigger monetization role in areas from advertising to mini-games and online commerce. It also reflects the economic environment via services like ride-hailing and meal delivery — though the fintech division that incorporates that payments network is now Tencent’s most stagnant unit.
Tencent scored last year with game releases from Nexon Co.’s Dungeon & Fighter Mobile to its own PC shooter Delta Force — titles it intends to grow into so-called evergreen franchises that can generate steady cash.
But there’s no guarantee it can repeat that feat in 2025. Tencent joined global peers in slashing development jobs while realigning its focus on fewer key titles. Its pipeline remains strong with a handful of likely hits including Honor of Kings: World, Monster Hunter Outlanders, and the China release of Goddess of Victory: Nikke.
–With assistance from Vlad Savov, Claire Che, Luz Ding, Debby Wu and Charlotte Yang.
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