Tencent’s latest quarterly report delivered what investors have come to expect from the company. It posted revenue of RMB 192.87 billion (USD 27 billion) for the third quarter of 2025, up 15% year-on-year (YoY) and slightly ahead of market forecasts. All three core businesses (gaming, advertising, and fintech and enterprise services) recorded varying degrees of growth, supporting steady topline expansion.
Gaming was the strongest performer. Overseas gaming revenue rose 43% from a year earlier. Advertising benefited from higher ad load rates and increased spending by advertisers, while artificial intelligence contributed to internal efficiency gains. Fintech and enterprise services were lifted by China’s broader economic recovery as payment and lending activity picked up and cloud demand strengthened.
Profit growth remained solid. Gross profit increased 22% YoY to RMB 108.8 billion (USD 15.2 billion), and non-IFRS operating profit rose 18% to RMB 72.6 billion (USD 10.2 billion). Both metrics have now outpaced revenue growth for 12 consecutive quarters.
Capital expenditure also drew attention. Tencent spent RMB 12.98 billion (USD 1.8 billion) during the quarter, a 24% YoY decline and a reduction of more than 32% from the previous quarter.
On the post-earnings call, management said full-year capital spending for 2025 will come in below its earlier guidance range, although still above 2024 levels. Tencent is one of China’s major AI developers and infrastructure providers, so the decision to scale back spending has cooled some of the recent enthusiasm surrounding domestic AI buildouts.
A guidance that was modest from the start
Alibaba has taken a far more aggressive approach. At the beginning of 2025, it announced a RMB 380 billion (USD 53.2 billion) plan to invest in cloud and AI infrastructure over three years, ostensibly the largest such commitment by a Chinese private enterprise.
That set a higher bar for Tencent. Yet at its 2024 earnings conference, Tencent offered only a broad indication of 2025 spending. It expected capital expenditures to reach the “low teens” as a percentage of revenue, or roughly 10–13%.
With Tencent generating about RMB 660 billion (USD 92.4 billion) in 2024 revenue, analysts projected its 2025 capital spending at roughly RMB 90 billion (USD 12.6 billion), about 17% higher than the RMB 76.8 billion (USD 10.8 billion) recorded for 2024. Even then, the guidance fell short of market expectations.
The latest quarterly report confirmed a downward revision, noting only that 2025 spending will exceed 2024 levels. During the prior quarter, Tencent had attributed reduced spending to chip export restrictions, which implied that capital expenditures could rise later in the year. This time, it said its current GPU reserves are sufficient to meet internal needs.
Alibaba’s aggression versus Tencent’s restraint
Alibaba has emerged as the most assertive investor in AI infrastructure in China, while other major players, including Tencent and ByteDance, have been more restrained. This contrasts with the intensity of competition among global cloud providers such as Google, Amazon, and Microsoft.
The divergence reflects different market structures. Globally, the cloud industry is fragmented. As of the second quarter of 2025, Amazon held 32% of the market, Microsoft 22%, and Google 11%, with growth rates of 17.5%, 39%, and 31.7%, respectively. Microsoft and Google, the smaller players, are gaining ground quickly.
In China, Alibaba Cloud led the first half of 2025 with a 35.8% share, according to Omdia, well ahead of Volcano Engine at 14.8% and Huawei Cloud at 13.1%. That dominant position gives Alibaba both the capability and the motivation to invest heavily in AI.
Tencent’s circumstances are different. Its WeChat ecosystem remains a durable social platform that protects its broader business. Alibaba does not have a comparable moat. Its core e-commerce operation faces mounting competition, with Pinduoduo concentrating on low-cost products, JD.com emphasizing premium service, and Douyin expanding rapidly in online retail.
Alibaba once controlled close to 85% of China’s e-commerce market in 2015. By 2024, its share had fallen below 40%. With its core business under sustained pressure and traffic growth slowing, the company is pursuing AI as its next engine of expansion, which explains its aggressive posture.
Tencent is taking a more cautious approach. Its reliance on WeChat makes it less willing to shoulder the fixed costs tied to large-scale AI infrastructure, especially given recent examples of rising expenses in the sector, such as Meta’s. Tencent also faces the challenge of narrowing the gap with Alibaba’s Qwen in the large model race.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Zhang Fan and Huang Yida for 36Kr.