Tencent Q1 revenue miss heightens pressure for AI payoff

Published Wed, May 13, 2026 · 07:39 PM

The figure is up 9% at 196.5 billion yuan, less than the average analyst forecast of 199.4 billion yuan

[BEIJING] Tencent’s March-quarter revenue missed estimates, underscoring the urgency around its costly artificial intelligence pivot – while core businesses such as games and advertising show signs of age.

Revenue for the three months climbed 9 per cent to 196.5 billion yuan (S$36.8 billion), less than the average analyst forecast of 199.4 billion yuan.

Net income rose to 58.1 billion yuan, higher than the 57.8 billion yuan projection.

The lukewarm performance could exacerbate investor concerns about the exact means with which China’s most valuable company will monetise AI.

While Tencent has vowed to at least double investments in the field to more than 36 billion yuan in 2026, it trails peers including ByteDance and Alibaba Group, in terms of both user adoption and advances in developing state-of-the-art large language models (LLM).

Mirroring their peers in Silicon Valley, Chinese big tech companies are confronting scepticism over the timeline for an AI payoff, as ballooning infrastructure costs compress margins.

Tencent’s outlay remains among the most conservative of the bunch, with Alibaba pledging a rolling target of more than US$50 billion over three years.

Taken together, Chinese corporate spending falls drastically short of the hyperscale budgets in the US – where the quartet of Amazon.com, Alphabet, Meta Platforms and Microsoft plans to deploy more than US$700 billion in 2026.

Tencent trails offerings from rivals Moonshot and DeepSeek

Tencent has shed roughly US$160 billion – or 23 per cent – of its market value this year, far exceeding the slide by Alibaba, which reported earnings on the same day.

Investors in both Chinese companies have recently shifted their focus towards pure-play AI model creators such as Zhipu and MiniMax Group, their valuations having multiplied since their stellar market debuts in January.

The Shenzhen-based company in April revealed a major upgrade to its foundation model, Hunyuan, or HY – its first high-stakes test, after it restructured its AI operations under the stewardship of OpenAI hire Yao Shunyu.

The open-source model still trails offerings from Moonshot and DeepSeek on key attributes such as coding and linguistic nuance.

Tencent also leverages DeepSeek to power its main ChatGPT-style chatbot, setting it apart from domestic Internet peers.

“Tencent’s close partnership with DeepSeek offers an important fallback option, should its proprietary HY LLM fail to reach the state-of-the-art tier,” Nomura analysts wrote in a note before the results.

Outside AI, Tencent’s new game releases have received a mixed reception, while evergreen titles such as Honor of Kings remained cash cows.

The developer of Honor of Kings: World – a high-budget open-world title leveraging Tencent’s most popular franchise – recently apologised to players for a bad experience, citing “presumptuous assumptions” regarding the game’s direction.

Still, the company remained anchored by WeChat, the ubiquitous social clearing-house that feeds its revenue streams from gaming to e-commerce.

The company views the app as the natural launchpad for AI-powered agents designed to automate tasks such as ride-hailing and travel bookings – though it has yet to provide a roll-out schedule. BLOOMBERG