Goldman Sachs: Tencent Holdings (00700)'s third-quarter results beat expectations, AI driven business growth and maintained target price of HK$770

The Zhitong Finance App learned that Goldman Sachs released a research report saying that Tencent Holdings (00700) performed steadily in the third quarter, achieved the fastest revenue growth in four years, and adjusted operating profit grew steadily, strengthening the bank's positive view of the company. Due to its unique WeChat ecosystem and global gaming assets, it has multiple monetization levers, which helped the company achieve compound profit growth through the macro cycle. Maintain the target price of HK$770.

The bank continues to believe that Tencent is one of the companies in the Chinese Internet sector that is in the best position to benefit from the continued application of AI. Gaming and marketing services, the two major revenue sources, have maintained year-on-year growth of more than 20% for three consecutive quarters. The bank raised its revenue forecast for 2025 to 2027 by 0 to 1% to reflect continued improvements in the growth of gaming, marketing services and financial/corporate services, and fine-tuned the 2025 to 2027 net profit forecast -1 to 0%. The strong revenue growth was partially offset by an increase in AI-related computing power leasing expenses, AI native application marketing expenses, and AI project R&D expenses.

The bank lowered Tencent's capital expenditure forecast for 2025 and 2026 to 80 billion yuan and 100 billion yuan (originally 100 billion/117 billion yuan), reflecting the limited supply of external chips, the company obtained more computing power in the form of leases (OPEX increased, CAPEX declined). Management said the GPU capacity was sufficient for internal needs.