Preface:

In February, Alibaba Group CEO Wu Yongming announced that Alibaba will invest more than 380 billion yuan over the next three years to build cloud computing and AI hardware infrastructure, an investment amount exceeding the sum of the past decade.

Even though Tencent keeps a low profile, it is difficult to avoid this large-scale AI investment race.

Tencent not only needs to use AI technology to consolidate its achievements in the PC and mobile internet era but must also make strategic investments for future development before the advent of the intelligent era.

Author | Fang Wensan

Image source | Network

Tencent releases Q4 and full-year 2024 financial report

On March 19, 2025, Tencent announced its latest financial report.

In the previous quarter, Tencent achieved revenue of 172.45 billion yuan, a year-on-year increase of 11%; net profit of 51.324 billion yuan, a year-on-year increase of 90%; and adjusted net profit of 55.312 billion yuan, a year-on-year increase of 30%.

For the full year, Tencent achieved revenue of 660.26 billion yuan, a year-on-year increase of 8%; net profit of 194.073 billion yuan, a year-on-year increase of 68%; and adjusted net profit of 222.703 billion yuan, a year-on-year increase of 41%. Based on adjusted net profit, Tencent's average daily earnings in 2024 were 608 million yuan.

Value-added services, marketing services, and financial technology and enterprise services constitute Tencent's main sources of revenue.

In 2024, Tencent's value-added services business revenue reached 319.2 billion yuan, a year-on-year increase of 7%.

The revenues of the other two businesses, marketing services and financial technology and enterprise services, also achieved year-on-year growth, at 121.4 billion yuan and 212 billion yuan, respectively, with respective year-on-year increases of 20% and 4%.

Revenue in the fourth quarter of 2024 reached 172.446 billion yuan, a year-on-year increase of 11%, re-achieving double-digit growth;

Operating profit (Non-IFRS) was 59.48 billion yuan, a year-on-year increase of 21%, exceeding revenue growth for the ninth consecutive quarter.

Unprecedented AI capital expenditure with continued investment

The report pointed out that due to in-depth investment in the AI strategy, Tencent's capital expenditure in the previous year reached 76.7 billion yuan, an increase of 221% over the previous year, setting a record high and accounting for approximately 12% of the total annual revenue of 660.3 billion yuan.

Tencent President Martin Lau said that Tencent's capital expenditure significantly increased in the previous quarter, mainly due to the purchase of more GPUs to meet inference demand.

He revealed that Tencent plans to further increase capital expenditure in 2025 and expects capital expenditure to account for a low double-digit percentage of revenue.

This means that Tencent's capital expenditure this year could reach the 100 billion yuan level.

Public focus on Tencent is clearly concentrated in the field of AI, and the development of AI has made Tencent almost a "moonlight clan".

In the fourth quarter, Tencent's net cash flow from operating activities was 54 billion yuan, but this amount was offset by 39 billion yuan used for AI-related capital expenditures and 8.5 billion yuan used for media content and other expenditures, resulting in free cash flow of 4.5 billion yuan for the quarter.

Although 4.5 billion yuan in free cash flow is not insignificant, compared with the same period last year, Tencent generated free cash flow of 40.4 billion yuan and 58.5 billion yuan in the second and third quarters, respectively.

Tencent also announced another data point: capital expenditure achieved triple-digit year-on-year growth for four consecutive quarters, with annual capital expenditure exceeding 76.7 billion yuan, a year-on-year increase of 221%, setting a record high.

This means that Tencent's capital expenditure of 39 billion yuan in the fourth quarter of the previous year exceeded the combined capital expenditure of 37.7 billion yuan in the first three quarters and even exceeded the full-year capital expenditure of 23.9 billion yuan in 2023.

Integrating the DeepSeek large model + AI application products

On the same day as the financial report was released, Tencent elaborated on its AI strategy at the 2025 Global Digital Ecology Conference Shanghai Summit.

Tencent plans to adopt a multi-model strategy of "firmly investing in self-developed models + openly embracing advanced open-source models" to conduct comprehensive layouts at the basic capability layer, model layer, and application layer, in order to provide a wealth of AI application products and promote industrial innovation and growth.

This indicates that while actively integrating the DeepSeek large model, Tencent will also continue to increase investment in research and development of self-developed large model technology.

To further enhance organizational collaboration efficiency, Tencent has adjusted more AI products and applications such as Tencent Yuanbao, QQ Browser, Sogou Input Method, and ima to CSIG (Cloud and Smart Industries Group).

In February, Tencent comprehensively launched the "Blitzkrieg" plan, becoming one of the leading companies actively embracing DeepSeek.

Not only has it integrated the DeepSeek model into multiple products, but it has also become the first leading enterprise to introduce DeepSeek into its major C-end products.

To date, products such as WeChat, Yuanbao, QQ Browser, QQ Music, ima (Tencent Smart Workbench), Tencent Docs, and Tencent Maps have all been integrated with DeepSeek and simultaneously support the self-developed Hunyuan large model.

In this opening battle of AI applications, Tencent has two strategic initiatives that have attracted significant industry attention: one is the integration of WeChat search with the DeepSeek large model;

the other is the concentration of resources to strengthen the development of Yuanbao. According to Tencent, 30 versions were updated within 35 days, demonstrating Tencent's determination and effort in this field.

Taking the integration of DeepSeek as an opportunity, Tencent has built a dual-model technological foundation combining open source and self-development.

In the coming period, Tencent will use this as a foundation to rapidly advance the integration of AI technology with its B-end and C-end businesses, in order to seize what Pony Ma referred to as "the opportunity for AI popularization that every industry should embrace".

After the financial report was released, Pony Ma said that Tencent had communicated with Liang Wenfeng and expressed admiration for the independent and open-source products appearing on the market.

Liang Wenfeng's statement temporarily reassured Tencent, giving Tencent more confidence in clearly choosing the dual-engine strategy of open source + self-development for large model technology infrastructure.

Moreover, as the technology giant with the deepest cooperation with DeepSeek, Tencent is likely to continue to be the main beneficiary after DeepSeek releases its next-generation inference model.

Rumors indicate that DeepSeek's new model will be released as early as April this year.

Yuanbao becomes the fulcrum leveraging Tencent's AI progress

DeepSeek technology provides important technical support for Tencent's business groups to accelerate the realization of AI.

Pony Ma's judgment at the annual report communication meeting was that the level of AI intelligence has significantly improved compared to previous years. After careful consideration, Tencent has integrated its cloud business and AI technology with DeepSeek technology.

In the future, with the widespread development of AI applications, everyone is actively seeking opportunities for AI implementation. At the same time, the development of AI Agents also indicates the huge potential of AI-related tools.

From the perspective of rapidly promoting AI applications, the combination of Hunyuan and DeepSeek is the most suitable model and path for Tencent at the current stage.

Tencent's self-developed Hunyuan large model is the first in the industry to adopt the MoE architecture, with its flagship model parameters reaching the trillion level and having been applied in over 700 products and business scenarios of Tencent.

Integrating the DeepSeek large model has to some extent promoted the rapid upgrading of the Hunyuan large model.

Recently, Tencent launched the Hunyuan self-developed inference model Thinker (T1), which excels in complex tasks and deep reasoning, and this model has been launched on Tencent Yuanbao.

In addition, Tencent also released a new generation of fast-thinking model Hunyuan Turbo S and open-sourced various models such as the [Image-to-Video Model] and [3D Generation Model].

According to estimated download figures from Qimai Data, since announcing its cooperation with DeepSeek on February 13, as of March 18, the Yuanbao app has been installed on over 7.17 million iPhone devices.

According to data released by QuantumBit Intelligence, Yuanbao's average daily active users (DAU) in February reached 3.6 million, a significant increase compared to before the cooperation.

QuestMobile statistics show that in December 2024, the monthly active users (MAU) of the Yuanbao App were 2.91 million.

Conclusion:

Goldman Sachs predicts that Tencent's gaming business will continue to maintain a growth rate of 10% in 2025, based on the high base in 2024. "Tencent's WeChat ecosystem and global gaming assets, as well as diversified monetization methods, will enable it to achieve compound growth in revenue amid macroeconomic cycles."

From this perspective, as Tencent accelerates the implementation of its AI strategy, the trend of heavy investment will continue, and it will comprehensively refresh its business foundation in the future, supporting the aggregation and growth of emerging businesses, thereby bringing greater expectations.

As Pony Ma said, "Currently, the AI ecosystem is still in its early stages, and all industries will benefit from the popularization of AI. I believe every industry will seize this opportunity."

Partial reference materials: All-Weather Tech: "Tencent to invest heavily in AI with 100 billion yuan", Alphabet Rank: "Crazy-earning Tencent, willing to go to the extreme for AI", Xuebao Finance and Economics: "Burning 400 million yuan a day, Tencent's bet on AI is a real 'yuanbao'", Geek Park: "Tencent returns to the AI playing field", Narrowcast: "Does Tencent have AGI ambitions?", Zinc Mark: "Tencent's homework can't be copied", SOHU Technology: "Behind Tencent's increased investment in AI: earning 600 million yuan a day last year, Pony Ma personally set the tone, saying he had communicated with Liang Wenfeng"