By Sherry Qin
Tencent Holdings extended its streak of double-digit profit growth in the first quarter despite the Chinese tech giant's ballooning investments to stay ahead in China's artificial-intelligence race, though revenue growth slowed.
The WeChat operator, China's largest company by market capitalization, is accelerating its AI efforts amid a recent strategy shift. Tencent was previously focused on leveraging the technology to boost productivity and reduce costs across various businesses. Now, it is more than doubling its AI investment after spending the equivalent of about $2.65 billion last year.
The company is trying to play catch-up as its foundation model, Hunyun, lags behind others by Chinese rivals like ByteDance and Alibaba. Analysts think its ample cash position, strong cash-generative gaming business, and the dominant WeChat ecosystem should help narrow the AI gap with peers.
The videogame and social-media company on Wednesday said net profit rose 21% from a year earlier to 58.09 billion yuan, equivalent to $8.55 billion, for the three months ended March. That beat the 56.56 billion yuan estimated by analysts in a FactSet poll.
The growth in adjusted net profit, which excludes certain noncash, one-time items, slowed to 11% from 17% in the final quarter of 2025.
Revenue climbed 9% to 196.46 billion yuan, missing analysts' expectations of 199.03 billion yuan.
Tencent's revenue from domestic games rose a modest 6% in the first three months of 2026, as the timing of the Lunar New Year this year meant a portion of revenue was recognized after the quarter. Advertising revenue climbed 20%, thanks to its upgraded AI ad recommendation model.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
05-13-26 0525ET
