Tencent’s AI investment yet to turn into significant revenue

The company reported revenue of 167.19 billion yuan ($23.14 billion) for the quarter ended September 30

Chinese gaming and social media leader Tencent Holdings said its investment in AI has yet to turn into significant revenue and may take several quarters to have a meaningful impact on earnings.

Tencent has intensified AI efforts over the last two years, developing services for large-language model training and deployment. It has also launched Yuanbao, a chatbot powered by its proprietary Hunyuan LLM.

The company and fellow Chinese tech giants have poured billions of dollars into AI development but monetisation remains a challenge.

There are fewer AI start-ups in China which are actually buying a lot of computing power. The AI revenue in China on the cloud side is somewhat at scale for us, but I think it will not be exploding like in the U.S., Tencent President Martin Lau said on a post-earnings call with analysts late on Wednesday.

Tencent has deployed artificial intelligence to enhance its products, such as by offering more targeted advertising, but these initiatives have not generated significant revenue and may take several quarters before related earnings reach a meaningful scale, he said.

Domestic peers Baidu and Alibaba, which have also invested heavily in artificial intelligence, report earnings in coming days.

Shares in Tencent, the world’s largest video game company and operator of the WeChat messaging platform, gained 1.54% in Hong Kong trading on Thursday.

The company reported revenue of 167.19 billion yuan ($23.14 billion) for the quarter ended September 30.

Domestic gaming revenue gained 14% to 37.3 billion yuan ($5.15 billion), extending the previous quarter’s 9% growth which in turn followed two quarters of decline. International gaming revenue rose 9% to 14.5 billion yuan ($2.00 billion).