Chinese web giant Tencent plans to introduce more AI-related functions and products to boost growth as the company reported a strong set of results for the final quarter of 2024. There is a chance it might turn its WeChat messaging service into an AI-powered super app with a slew of new functions, analysts say.
During Wednesday calls with the media and analysts, Tencent’s billionaire Chairman Pony Ma, President Martin Lau and other executives outlined the gaming and social media behemoth’s AI strategy. The technology is already improving the company’s bread-and-butter gaming business, they said, which is using AI to coach new players and provide better matches in online battles. In advertising, AI is helping Tencent analyze consumer behavior and place targeted promotions.
As a result, the company said, overall revenue grew a better-than-expected 11% year-on-year to 172.4 billion yuan ($24 billion) in the final three months of 2024. Profit attributable to shareholders was 51.3 billion yuan, up 90% from the fourth quarter of 2023.
Tencent’s Hong Kong-listed shares are up almost 30% this year as investors scramble for AI-related plays among China’s large technology companies following DeepSeek’s January release of a highly affordable model that shocked Silicon Valley. As Tencent increases AI-related spending, capital expenditure will account for a “low teens percentage” of 2025 sales, executives said during yesterday’s calls.
Previously, capital expenditure was a “high single digit” of Tencent’s revenue, according to Charlie Chai, a Shanghai-based analyst at research firm 86Research. The Chinese tech giant needs more graphic processing units (GPUs), a type of chip used to crunch data for AI.
Capital expenditure jumped 386% year-on-year to 36.6 billion yuan during the fourth quarter as the company went on a shopping spree for semiconductors, executives said yesterday. This year, there might be the need for more computing power, they added.
The company faces fierce local competition. Technology giants like Alibaba and ByteDance are all offering chatbots and AI assistant apps to China’s vast base of consumers, as they try to hook them with free services. Last week, Alibaba released its Quark AI assistant. In February, it announced it would invest at least 380 billion yuan over the next three years in cloud computing and AI-related infrastructure.
Tencent is promoting its Yuanbao AI assistant app. The chatbot, which uses its self-developed Hunyuan model as well as DeepSeek’s R1 reasoning model, can answer questions, search the internet, generate summaries and take voice calls. It was China’s fifth most popular AI product in February with 13 million monthly active users, according to aicpb.com, a Hunan-based ranking site.
Yuanbao is only one way for Tencent to attract users. In February, the company started to incorporate AI-based search functions in WeChat, which has almost 1.4 billion users. During yesterday’s analyst call, Lau said Tencent may create a tailored AI agent for the messaging service.
The digital assistant can be connected to various functions within WeChat that are called mini-programs. Those embedded services let users shop, read, buy plane tickets and play games without leaving the WeChat platform. Lau said Tencent could “easily build” an agent connected to various mini-programs to perform complex tasks.
He didn’t give a timeline for such products. Tencent’s AI endeavors could continue to be powered by its own Hunyuan model along with external products, as different models are good at different tasks, executives said during yesterday’s calls.
The eventual goal might be creating an AI-based super app, and among all of China’s tech giants, Tencent might have the best chance of doing so since it has a huge number of users on various consumer-oriented apps, says Shawn Yang, a Hong Kong-based senior research analyst at Arete Research. Lau said Tencent might also integrate more AI functions into its QQ messaging service, which has more than 500 million active monthly users.
“I think we would see more and more AI … products,” Lau said during the call. “And at the same time, each one of the products will continue to evolve.”
