Overnight, U.S. markets witnessed a spectacular surge in Chinese assets ignited by Tencent Holdings Ltd.'s stellar performance. Following the release of Tencent's Q2 2025 financial results on August 13, all three major U.S. indices opened higher, with Tencent Holding Ltd. ADR surging nearly 7% to reach a four-year high, pushing the company's total market capitalization above $700 billion.

What made Tencent's Q2 2025 results so exciting for the market? The core metrics were impressively robust: revenue grew 15% year-over-year to 184.5 billion yuan, reaching a record high; non-IFRS operating profit increased 18% year-over-year to 69.25 billion yuan. Looking deeper, gross profit surged 22% year-over-year to 105 billion yuan, driving the overall gross margin to 57%. Over a longer timeframe, this marks nine consecutive quarters of revenue growth, with gross profit and operating profit outpacing revenue growth for 11 straight quarters.

To put these figures in perspective, Q2 2025 revenue hit a new high with growth reaching a four-year peak. Gross profit, gross margin, advertising revenue, and overseas gaming revenue all achieved record highs - Tencent's profit-making efficiency has officially entered "Max mode."

Additionally, markets caught a positive signal from the financial report. Tencent's Q2 2025 capital expenditure on AI-related training clusters and model iterations increased 119% year-over-year to 19.11 billion yuan. Over the past six quarters, Tencent's capital expenditure has maintained roughly triple-digit growth rates, yet rather than dragging down overall revenue, operating profit, and gross profit, this aggressive AI investment has enhanced business quality.

Behind this comprehensive outperformance, Tencent's unstoppable "star performer" is becoming clear.

**AI Takes Center Stage Over WeChat**

Examining Tencent's Q2 2025 results, the undeniable AI integration represents the key driver of Tencent's momentum. Unlike some internet companies, AI at Tencent hasn't operated as an independent division but has been seamlessly integrated across various business segments. On the surface, the three core businesses - advertising, fintech, and gaming - all achieved double-digit growth through deep AI integration. In reality, AI integration increasingly highlights Tencent's scenario advantages, accelerating AI's transformation from "technological capability" to performance "growth driver."

AI's most immediate impact has been on the advertising business. Tencent's Q2 2025 marketing services revenue grew 20% year-over-year to 35.8 billion yuan, marking the 11th consecutive quarter of double-digit growth and reaching a record high. This stems from two factors: first, AI-driven advertising platform efficiency improvements, particularly in ad creation, placement, and recommendation capabilities showing "outstanding results."

According to management comments during Tencent's earnings call, these three aspects correspond to generative AI creating advertising materials that drive ad demand, more precise targeted placement improving click-through rates, and new traffic from AI-native application scenarios. As reference, in May this year, Tencent's Chief Strategy Officer James Mitchell praised AI's boost to advertising, noting "historically, banner ads had click-through rates of about 0.1%, news feed ads about 1.0%, while AI has pushed certain ad click-through rates to 3.0%, with the upper limit still being explored."

Second, AI is accelerating liquidity within WeChat's transaction ecosystem, with time spent and consumption behaviors rising across WeChat Mini Programs, WeChat Shop, and Video Account. Q2 2025 combined monthly active accounts for WeChat and WeChat reached 1.411 billion, up 3% year-over-year. While outsiders are surprised WeChat can maintain penetration at such high base numbers, Tencent internally increasingly emphasizes WeChat ecosystem's importance to the group. As WeChat's transaction ecosystem optimizes, advertiser demand for Video Account, Mini Programs, and WeChat Search ad inventory continues strengthening.

First, Video Account advertising reached 35% of overall share, with AI stimulating Video Account ad revenue to surge over 50% year-over-year. This strong growth also stems from Video Account's ad loading rate remaining in low single digits, compared to industry peers' generally 10%+ loading rates, indicating massive improvement potential.

Second, Mini Programs achieved 18% year-over-year GMV growth with 20% overall transaction volume growth during the quarter.

Third, WeChat Search achieves seamless integration between search and service implementation, enabling users to jump from search to Mini Programs for ticket purchases, appointments, and other operations, effectively solving the challenge of bridging AI search to scenario implementation.

Naturally, WeChat's highest hopes for 2025 remain with WeChat Shop. On one hand, WeChat Shop is accelerating integration with Mini Programs, not only enabling multiple Mini Program connection capabilities but also launching "Associated Merchant Mini Program Membership" functionality to meet merchants' full-scenario member service needs including points and benefits distribution. On the other hand, WeChat Shop continues exploring innovative social features, extending "gift-giving" to Video Account, Official Account, and Mini Programs while introducing "Buy Together with Friends" functionality for richer social shopping experiences.

According to sources, WeChat Shop's full-year 2024 GMV grew 192% year-over-year, with order volume up 125%. The number of merchants within WeChat's ecosystem doubled, with over 3,000 cumulative service providers serving over 40,000 merchants. Based on WeChat's first-half 2025 progress, strengthening service provider-merchant matching capabilities and simplifying platform policies will remain key themes for the second half.

Additionally, Tencent revealed in its financial report that Q2 WeChat Mini Games total transaction volume grew 20% year-over-year. Notably, the current Mini Games market shows a "one dominant, multiple strong" pattern, with WeChat Mini Games accounting for nearly 80% overall share, followed by distribution channels including Douyin, Kuaishou, Alipay, Meituan, and Bilibili. Essentially, Tencent dominates the "meat-eating," while ByteDance can only "sip soup."

Even so, Tencent continues expanding its advantage. Sources indicate Tencent Advertising launched the IAP Mini Games placement toolkit to help advertisers promote better. WeChat also introduced playable incentive ads, community gift interactions, automated ad placement, long-term ROI bidding tools, and Video Account mini-tasks to continuously develop new placement scenarios for Mini Games.

Consequently, Mini Games have become the content carrier connecting various WeChat scenarios - from Moments to WeChat Status to Video Account, not only bridging mobile-to-PC extension paths but establishing a universal, entertainment-oriented new social currency within WeChat.

As always, WeChat needs only slight effort to create hard mode for other platforms. If AI further unlocks WeChat's "vital meridians," many platforms likely couldn't even catch WeChat's taillights.

Tencent's prowess also lies in significantly stimulating advertising demand growth through AI while maintaining strict financial discipline. Q2 sales and marketing expenses as a percentage of revenue dropped to 5% and remained low for two consecutive quarters, enabling advertising business gross profit to exceed revenue growth at 24%.

Of course, if advertising business represents low-hanging "fruit," then fintech and enterprise services constitute a tough "bone" to chew. This business faced market criticism for lackluster performance over several past quarters, but after AI "enlightenment" in Q2 2025, it also perked up, with revenue growing 10% year-over-year to 55.5 billion yuan, achieving the highest year-over-year growth rate in six quarters.

Specifically, this benefited from growth in consumer lending services, commercial payment activities, and wealth management service revenue, plus increased enterprise customer demand for AI-related services, including GPU rental, API token usage, and merchant technical service fee growth.

The underlying business ambition involves Tencent comprehensively advancing AI upgrades from foundational large models, computing power, and development tools to application layers. For this, Tencent's Q2 2025 R&D expenses increased 17% year-over-year to 20.25 billion yuan. Since 2018, R&D investment has exceeded 379.5 billion yuan, demonstrating Tencent's determination in the AI arms race.

Sources indicate Tencent launched comprehensive "computing power to human resources" escalation in AI this year. Company leadership stated, "As long as business teams can prove their projects achieve AI empowerment in products or develop independent AI tool products, the company will set no computing power or human resource limits under resource guarantee conditions."

Specific Q2 2025 implementation included Hunyuan large model upgrades to flagship models TurboS and T1, especially the Hunyuan 3D model leading the industry in geometric precision, texture realism, and instruction-to-3D alignment capabilities, topping Hugging Face rankings. Currently, Hunyuan 3D v2.5 is fully launched on Tencent Cloud, with the entire Hunyuan 3D series accumulating over 2.3 million community downloads.

Regarding Tencent Yuanbao, it deeply integrates into core scenarios like WeChat and QQ, demonstrating unique advantages in image understanding, text-to-image, text-to-video, vertical information sources, voice interaction, and Tencent ecosystem adaptation. Moreover, after QQ Browser upgraded to AI Browser, it launched QBot equipped with Hunyuan and DeepSeek, serving over 50 million users for free during the 2025 college entrance examination season alone.

Notably, in January this year, Tencent Yuanbao transferred from TEG (Technology Engineering Group) to CSIG. In February, QQ Browser, Sogou Input Method, and other AI applications successively transferred to CSIG. Combining forces, CSIG has become Tencent's core department for AI product implementation.

**Gaming Control Returns to Upward Cycle**

Although AI seized center stage from WeChat in Q2 2025, becoming the "catalyst" lifting Tencent's various businesses, the core driver of Tencent's quarterly "blood pumping" remains gaming - Tencent's Q2 2025 gaming business revenue grew 22.06% year-over-year to 59.2 billion yuan.

Specifically, domestic market gaming revenue grew 17% year-over-year to 40.4 billion yuan. On one hand, this benefited from new game "Delta Force" breakthrough - July daily active users exceeded 20 million, entering the top five domestic daily active users and top three gaming revenue elite tier. On the other hand, this relied on evergreen games "Honor of Kings," "VALORANT," and "PUBG Mobile" maintaining impressive monetization capabilities, essentially continuing IEG's upward gaming momentum since late 2024.

A corresponding new trend shows that since 2024, Tencent's new first-tier products began emerging prominently. "Teamfight Tactics," "VALORANT," "Naruto," "Arena Breakout," "Delta Force," plus LOL Mobile and CF Mobile all climbed to the top of various segmented categories on both mobile and PC platforms.

Even more impressively, Tencent continued dominating the global Chinese mobile game publisher revenue rankings for the first half of 2025, staging a "king's return" - Tencent's dominance over the gaming industry received full validation.

This relies on support from several Tencent flagship products. According to AppMagic estimates, "Honor of Kings" was the only mobile game exceeding $1 billion revenue in the first half of this year, achieving global revenue "three-peat" from 2022-2024 with absolute advantage. "PUBG Mobile" revenue grew steadily in Q2 2025, with its "Metro Exodus" mode daily active users exceeding 37 million on May 1. "Dungeon & Fighter: Origin" returned to top grossing charts with recent anniversary celebrations, while "Dungeon & Fighter: Innovation Century" saw 60% daily active user growth in May after updating the "Gravity Spring" version in early year.

Regarding this performance, Pony Ma gave full recognition: "Evergreen games like 'Honor of Kings' and 'PUBG Mobile' evolved toward platformization with increased AI application, while new game 'Delta Force' also achieved breakthroughs, making gaming business perform excellently in both user and revenue aspects."

Naturally, gaming's strong performance also benefits from AI assistance - for example, launching more realistic virtual teammates and non-player characters based on AI technology, typically "Honor of Kings'" new "Commander Mode," plus AI voice assistant "Lingbao" enabling personalized match companionship.

Sources indicate Tencent's 3D large model series achievements significantly boosted gaming business implementation. Notably, 3D world models are immersive, interactive, simulation-capable world generation models serving gaming development, VR, digital content creation, and other fields.

Deeper reasons involve shooting categories being in growth mode. Gaming industry reports show that among the top 100 mobile games by revenue in the first half, shooting games' proportion rose from 13.89% in 2024 to 17.03% in the first half of this year. Shooting was already Tencent Gaming's advantageous category, with further dominance strengthening over the past six months.

Regarding specific products, whether mature products like "PUBG Mobile" and "CrossFire" operating for years, or new forces like "Arena Breakout," "VALORANT," and "Delta Force," all demonstrate dominance in segmented categories. According to Shunwang's internet cafe gaming heat rankings, Tencent products occupied seven of the top 10 popular games, including veteran flagship products like "League of Legends," "Dungeon & Fighter," and "CrossFire," plus new generation forces like "VALORANT" and "Delta Force."

For international markets, Q2 revenue grew 35% year-over-year to 18.8 billion yuan, with Tencent achieving record highs for four consecutive quarters. First came boosts from Supercell games and "PUBG MOBILE" revenue growth. In April, PUBGM monthly revenue hit record highs, mainly driven by Egyptian-themed skins. "Clash Royale" achieved nearly seven-year revenue highs in June through content updates and reward mechanism optimization. According to Sensor Tower, "Clash Royale" rose to global third place in the first half of this year, becoming Supercell's currently highest daily active product.

Second, new game "Dune: Awakening" performed well. Since officially launching June 10 this year, global sales exceeded 1 million in under two weeks, becoming Funcom's fastest-selling game ever, with Steam platform concurrent peak exceeding 189,000.

Additionally, Tencent holds the soon-to-launch "VALORANT: Mobile," currently exceeding 60 million pre-registrations and potentially becoming Tencent's next flagship shooting game. There are also "Honor of Kings: World," "Under One Person," "Sword Snow Stride," and other projects receiving significant market attention, accumulating momentum for gaming segment's medium-to-long-term development.

At this point, Tencent's gaming industry layout and content control have returned to an upward cycle.