Macquarie's research report indicates that TENCENT (00700) delivered healthy performance in the fourth quarter of 2025, supported by Video Accounts and a resilient gaming portfolio. During the period, revenue and adjusted net profit increased by 13% and 17% year-on-year, respectively. The firm has lowered its adjusted earnings per share forecasts for TENCENT for 2026 and 2027 by 1% and 3%, respectively. The target price has been reduced from HK$569 to HK$559, with a "Neutral" rating maintained. The report suggests limited upside for near-term profits and expects the stock price to remain range-bound until substantial breakthroughs are achieved in AI-led initiatives. Management is shifting toward a capital-intensive catch-up phase, focusing on AI infrastructure, foundational models, and new product development. While Macquarie views this as the correct strategic move, the potential for AI-driven margin expansion in the short term may be offset by heavy capital requirements.