Tencent Q4 Earnings Overview
Tencent reported Q4 financial results after the Hong Kong close that beat analyst expectations. The solid quarter was driven by “AI-powered enhancements to our advertising platform, higher engagement in Video Accounts, and growth in our evergreen games,” according to Founder, Chairman, and CEO Ma “Pony” Huateng.
The company emphasized AI in their press release, which included a quote from Ma saying “we have re-organized our AI teams to sharpen focus on both fast product innovation and deep model research, increased our AI-related capital expenditures, and increased our R&D and marketing efforts for our AI-native products”. The presentation dedicated an entire section to AI, noting the company spent $10.7 billion on AI in 2024, which represents a capex of 12% of revenue, up from 2023’s $3.4 billion when capex accounted for 4% of revenue. The press conference and analyst Q&A were dominated by AI talk as well. In a good sign for the company and China’s economy, the company noted, “Advertising spending rose across most major categories during the quarter.” Advertisers don’t spend ad dollars if no one is buying! Hat tip to management for the shareholder-friendly buyback and dividend policies! Here are some highlights:
- Revenue increased by +11% to RMB 172.45 billion ($24 billion) from RMB 155.20 billion and versus analyst expectations of RMB 168.74 billion.
- Revenue Segments:
- Value Added Services increased by +14% to RMB 79 billion (social networks up +6%, domestic games up +23%, international games up +15%)
- Marketing Services up +17% to RMB 35 billion
- FinTech and Business Service up +3% to RMB 56.1 billion
- Adjusted Net Profit increased by +30% to RMB 55.31 billion ($7.7 billion) from RMB 42.68 billion and versus analyst expectations of RMB 53.28 billion.
- Adjusted EPS increased by +33% to RMB 5.48 from RMB 4.44 and versus analyst expectations of RMB 5.47.
- In 2024, the Company repurchased approximately 307 million shares on the Hong Kong Stock Exchange for HKD 112 billion.
- For 2025, we propose to increase our annual dividend by 32% to HKD 4.50 per share (equivalent to approximately HKD 41 billion) and repurchase at least HKD 80 billion worth of our shares.
Key News
Asian equities were mixed overnight on light volumes as Indonesia and Thailand outperformed, and investors waited for today’s US Federal Reserve announcement.
Hong Kong and Mainland China bounced around the room as value stocks outperformed growth stocks in both markets. Utilities were the best-performing sector in both Hong Kong and Mainland China, up +0.92% and +1.26%, respectively, after the National Development & Reform Commission (NDRC) promoted renewable energy. There was some media attention given to Bank of America’s China strategist calling for a correction by comparing today’s rally to the 2015 rally. I’ve not read the report, but I am skeptical as I find the comparison ridiculous. The 2015 rally was driven by legal and illegal margin debt. As noted yesterday, net US flows into US-listed China equity ETFs are less than $1 billion year-to-date (YTD), despite significant outperformance versus US stocks. US-listed European-focused ETFs have received $5.8 billion YTD!
Going back to mid-January 2024’s China equity bottom, the outperformance versus US stocks is very significant, but flows are still muted, and there has been very little love from US investors! The geopolitical headwinds and constant negative US and Western media headlines would change with a Trump-Xi meeting. There was some chatter that this could occur in June, though nothing definitive yet! Corrections will occur and are healthy, though I suspect dips will be bought.
Today’s Hong Kong dip was bought by Mainland investors with a healthy $1.52 billion of net buying of Hong Kong stocks and ETFs via Southbound Stock Connect. Alibaba and the Hong Kong Tracker ETF were significant large buys. Hong Kong internet stocks were mixed ahead of Tencent’s Q4 results, with KE Holdings down -10.71% post yesterday’s Q4 results.
BYD gained +3.89% in Hong Kong and +3.25% in Mainland China following yesterday’s 5-minute battery recharge release. The Ministry of Transport announced a subsidy for cities to trade in their gas buses for electric vehicle (EV) buses, which is in the company’s sweet spot. The Financial Times has an article stating that BYD was told to tap the brakes on building a plant in Mexico due to the Chinese government’s worry the technology might “leak” to US rivals. I have one minor issue with the article. BYD has an EV bus plant in California! Maybe BYD should wait for Trump and Xi to meet and build an EV car plant in the US!
It is interesting that the Hong Kong government CEO criticized CK Hutchison (1 HK), which received $19 billion for selling its port in Panama to BlackRock. The stock ripped higher on the news, indicating they got a good deal. It is worth noting that Premier Li signed a State Council decree on “Regulations of the State Council on the Handling of International Intellectual Property Disputes”.
The Hang Seng and Hang Seng Tech diverged to close +0.12% and -1.05%, respectively, on volume that decreased -4.92% from yesterday, which is 167% of the 1-year average. 240 stocks advanced, while 231 stocks declined. Main Board short turnover increased by +12.75% from yesterday, which is 170% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Quality and large capitalization stocks outperformed the value factor, growth, and small capitalization stocks. The top-performing sectors were Utilities, up +0.92%, Healthcare, up +0.92%, and Materials, up +0.87%. Meanwhile, the worst-performing sectors were Real Estate, down -0.98%, Consumer Discretionary, down -0.86%, and Communication Services, down -0.4%. The top-performing subsectors were consumer services, national defense, and media. Meanwhile, the worst-performing subsectors were household appliances, real estate management, and telecommunication services. Southbound Stock Connect volumes were 3x pre-stimulus levels as Mainland investors bought a net $1.52 billion worth of Hong Kong-listed stocks and ETFs, led by the Hong Kong Tracker ETF and Alibaba, which were large net buys, XPeng, Xiaomi, and Dobot, which were small net buys, Tencent and SMIC, which were small/moderate net sells, and Meituan a large/moderate net sell.
Shanghai, Shenzhen, and the STAR Board fell -0.10%, -0.40%, and -1.18%, respectively, on volume that decreased -3.53% from yesterday, which is 123% of the 1-year average. 1,448 stocks advanced, while 3,531 stocks declined. The value factor and large capitalization stocks outperformed the growth factor and small capitalization stocks. The top-performing sectors were Utilities, up +1.26%; Financials, up +0.61%; and Industrials, up +0.48%. Meanwhile, the worst-performing sectors were Communication Services, which fell -3.77%; Technology, which fell -1.93%; and Real Estate, which fell -0.83%. The top-performing subsectors were precious metals, banking, and power. Meanwhile, telecommunication services, communication equipment, and electronic components were among the worst-performing sectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index barely fell versus the US dollar. Treasury bond prices gained. Copper rose, and steel fell.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.5% |
| Hang Seng Tech | HSTECH Index | 4% |
| Hong Kong Turnover | HKTurn Index | 16.8% |
| HK Short Sale Turnover | HKSST Index | 10.5% |
| Short Turnover as a % of HK Turnovr | N/A | 13% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | 0.1% |
| China (Shenzhen) | SZCOMP Index | 0.5% |
| China (STAR Board) | Star50 Index | 0.6% |
| Mainland Turnover | .chturn Index | -3.4% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 1% |
| Japan | NKY Index | 1.2% |
| India | SENSEX Index | 1.5% |
| Indonesia | JCI Index | -3.8% |
| Malaysia | FBMKLCI Index | 1% |
| Pakistan | KSE100 Index | 0.8% |
| Philippines | PCOMP Index | -0.3% |
| South Korea | KOSPI Index | 0.1% |
| Taiwan | TWSE Index | 0.7% |
| Thailand | SET Index | 0.5% |
| Singapore | STI Index | 0.9% |
| Australia | AS51 Index | 0.1% |
| Vietnam | VNINDEX Index | -0.4% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -0.24 |
| Communication Services | 9 | -0.41 |
| Consumer Discretionary | 28 | -0.87 |
| Consumer Staples | 13 | 0.02 |
| Energy | 7 | -0.09 |
| Financials | 23 | 0.36 |
| Health Care | 13 | 0.92 |
| Industrials | 20 | 0.35 |
| Information Technology | 10 | 0.48 |
| Materials | 10 | 0.86 |
| Real Estate | 6 | -0.99 |
| Utilities | 12 | 0.92 |
| Mainland China Listed | 404 | -0.19 |
| Communication Services | 6 | -3.79 |
| Consumer Discretionary | 31 | 0.36 |
| Consumer Staples | 24 | -0.24 |
| Energy | 13 | -0.43 |
| Financials | 64 | 0.58 |
| Health Care | 31 | -0.22 |
| Industrials | 64 | 0.45 |
| Information Technology | 91 | -1.96 |
| Materials | 58 | -0.2 |
| Real Estate | 6 | -0.86 |
| Utilities | 16 | 1.23 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 3.1 |
| Alibaba HK | 9988 HK Equity | 5.8 |
| JD.com HK | 9618 HK Equity | 5.3 |
| NetEase HK | 9999 HK Equity | 1.6 |
| Yum China HK | 9987 HK Equity | 3.6 |
| Baozun HK | 9991 HK Equity | 2.3 |
| Baidu HK | 9888 HK Equity | 12.2 |
| Autohome HK | 2518 HK Equity | 2.9 |
| Bilibili HK | 9626 HK Equity | 4.9 |
| Trip.com HK | 9961 HK Equity | 5.3 |
| EDU HK | 9901 HK Equity | 6 |
| Xpeng HK | 9868 HK Equity | 1.4 |
| Weibo HK | 9898 HK Equity | 4.7 |
| Li Auto HK | 2015 HK Equity | 6.8 |
| Nio Auto HK | 9866 HK Equity | 8.9 |
| Zhihu HK | 2390 HK Equity | 3.9 |
| KE HK | 2423 HK Equity | 4.8 |
| Tencent Music Entertainment HK | 1698 HK Equity | 7.1 |
| Meituan HK | 3690 HK Equity | 1.3 |
| Hong Kong’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| XIAOMI CORP-CLASS B | 3.3 |
| TENCENT HOLDINGS LTD | 3.1 |
| ALIBABA GROUP HOLDING LTD | 5.8 |
| BYD CO LTD-H | 4.1 |
| MEITUAN-CLASS B | 1.3 |
| XPENG INC – CLASS A SHARES | 1.4 |
| SEMICONDUCTOR MANUFACTURING | 4.3 |
| HONG KONG EXCHANGES & CLEAR | 1.8 |
| PING AN INSURANCE GROUP CO-H | 2 |
| SHENZHEN DOBOT CORP LTD | 6.4 |
| Shanghai and Shenzhen’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CONTEMPORARY AMPEREX TECHN-A | 0.4 |
| MIDEA GROUP CO LTD-A | 4.3 |
| VICTORY GIANT TECHNOLOGY -A | -0.7 |
| BYD CO LTD -A | 1.1 |
| SHANGHAI STONEHILL TECHNOL-A | 6.2 |
| EAST MONEY INFORMATION CO-A | 0.2 |
| CHINA UNITED NETWORK-A | -7.1 |
| CAMBRICON TECHNOLOGIES-A | -6.1 |
| ZHEJIANG WANMA CO LTD -A | 10 |
| SHANGHAI ATHUB CO LTD-A | 6.1 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.23 versus 7.22 yesterday
- CNY per EUR 7.88 versus 7.90 yesterday
- Yield on 10-Year Government Bond 1.87% versus 1.89% yesterday
- Yield on 10-Year China Development Bank Bond 1.91% versus 1.93% yesterday
- Copper Price +0.37%
- Steel Price -0.97%
—
Originally Posted March 19, 2025 – Tencent’s Terrific Q4 AI-nnounced!
Disclosure: KraneShares
Content on China Last Night is for informational purposes only and should not be construed as investment advice. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results; material is as of the dates noted and is subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities. Investing involves risk, including possible loss of principal.
This material contains general information only and does not take into account an individual’s financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.
Forward-looking statements (including Krane’s opinions, expectations, beliefs, plans, objectives, assumptions, or projections regarding future events or future results) contained in this presentation are based on a variety of estimates and assumptions by Krane. These statements generally are identified by words such as “believes,” “expects,” “predicts,” “intends,” “projects,” “plans,” “estimates,” “aims,” “foresees,” “anticipates,” “targets,” “should,” “likely,” and similar expressions. These also include statements about the future, including what “will” happen, which reflect Krane’s current beliefs. These estimates and assumptions are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo-political, competitive, and financial risks that are outside of Krane’s control. The inclusion of forward-looking statements herein should not be regarded as an indication that Krane considers forward-looking statements to be a reliable prediction of future events and forward-looking statements should not be relied upon as such. Neither Krane nor any of its representatives has made or makes any representation to any person regarding forward-looking statements and neither of them intends to update or otherwise revise such forward-looking statements to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such forward-looking statements are later shown to be in error. Any investment strategies discussed herein are as of the date of the writing of this presentation and may be changed, modified, or exited at any time without notice.
Disclosure: Interactive Brokers Third Party
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from KraneShares and is being posted with its permission. The views expressed in this material are solely those of the author and/or KraneShares and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: ETFs
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Join The Conversation
For specific platform feedback and suggestions, please submit it directly to our team using these instructions.
If you have an account-specific question or concern, please reach out to Client Services.
We encourage you to look through our FAQs before posting. Your question may already be covered!