12 August 2026 — Shenzhen, China: Tencent is earning more from games, advertising and digital services—but it is also spending at an unprecedented rate to secure a place in the global artificial-intelligence race.

The Chinese technology giant reported second-quarter revenue of RMB204.8 billion, representing an 11% increase from the same period last year.

Gross profit climbed 13% to RMB118.4 billion, while adjusted profit attributable to shareholders increased 9% to RMB68.4 billion.

Under standard IFRS accounting, however, profit attributable to shareholders advanced by only 0.7% to RMB56 billion, falling below analysts’ expectations.

The divide between revenue growth and modest reported-profit growth reflects the central story inside Tencent: its established businesses continue generating billions, while AI is absorbing an increasing share of that money.

AI Investment Jumps 176%

Tencent’s capital expenditure reached RMB52.8 billion, or approximately US$7.8 billion, during the quarter. That was 176% higher than a year earlier and substantially above the RMB31.9 billion spent during the first quarter.

The company used much of that money to acquire computing capacity and expand infrastructure supporting its AI models, consumer applications, coding tools and cloud services.

Tencent recorded negative free cash flow of RMB13.8 billion after operating cash was overtaken by infrastructure expenditure, content payments and other obligations.

The figure requires context. Tencent said free cash flow would have remained positive at RMB37.6 billion if advance payments for AI computing infrastructure were excluded.

The spending therefore represents a deliberate investment decision rather than evidence that the company’s underlying operations have stopped producing cash.

Building an “AI-Empowered Tencent”

Tencent is pursuing artificial intelligence across three connected areas: models, applications and infrastructure.

Its Hy3 model is intended to compete with advanced systems developed by Chinese rivals such as Alibaba and ByteDance, as well as international AI laboratories.

The company is also promoting WorkBuddy, an AI productivity assistant designed for office tasks, and CodeBuddy, a tool that assists software developers. Tencent says both products are experiencing rapid user growth in China.

AI capabilities are also being tested inside WeChat, known domestically as Weixin. Integrating an assistant into an application with an enormous existing audience could give Tencent an important distribution advantage.

The company is effectively betting that its messaging, gaming, advertising, payments and cloud ecosystems can provide AI products with users more quickly than a standalone start-up could acquire them.

Advertising Shows Early AI Returns

Tencent’s marketing-services revenue increased 22% to RMB43.6 billion, making it one of the quarter’s fastest-growing divisions.

The company credited AI-powered improvements in advertisement targeting, recommendations and pricing within the Weixin ecosystem.

This offers investors one of the clearest examples of AI already producing commercial value. Better targeting can help advertisers reach more relevant customers, potentially increasing sales while allowing Tencent to charge more for effective advertising placements.

Fintech and business-services revenue also increased 9% to RMB60.3 billion. Demand for cloud-based AI services contributed to that growth.

Games Remain Tencent’s Financial Engine

Despite its increasing focus on AI, gaming continues to provide Tencent with a dependable source of revenue.

Value-added services, which include gaming and social-network products, generated RMB98.4 billion—an 8% increase from the previous year.

Domestic gaming revenue climbed 17% to RMB47.3 billion, supported by titles including Delta Force, Valorant and Roco Kingdom: World.

International gaming revenue declined slightly to RMB18.6 billion because of currency movements. When exchange-rate effects were removed, the business recorded 4% growth.

This gaming income gives Tencent financial room to make costly, long-term AI investments without depending entirely on immediate revenue from new models and assistants.

Why This Matters

Tencent’s results illustrate the difficult calculation facing the world’s largest technology companies.

AI could create entirely new markets in software development, digital advertising, cloud computing and personal assistance. Building the necessary models and data centres, however, requires billions of dollars before those products generate reliable profits.

Tencent is choosing to spend heavily now, accepting weaker short-term cash flow in exchange for greater computing capacity and potential future market leadership.

The strategy carries risks. AI infrastructure can become outdated quickly, competition remains intense and customers may resist paying for services they currently receive cheaply or without charge.

But avoiding the investment could be even more dangerous. A company that dominates today’s internet services could lose that position if consumers begin accessing information, entertainment and commerce through AI assistants controlled by competitors.

Tencent’s official second-quarter results confirm that revenue reached RMB204.8 billion and capital expenditure rose 176%. Independent market reporting also noted that reported profit missed analysts’ expectations.

The company’s latest figures therefore tell two stories simultaneously: Tencent’s existing digital empire remains highly profitable, and the construction of its next one will be exceptionally expensive.