Tencent Holdings: 3Q26 Preview: AI Progress on Track, but Punished for Investing

Tencent is due to report 3Q26 results in mid Nov. In 3Q26, we expect total revenue to grow 7.4% YoY (9.4% consensus) while adj. profit to decline 6% YoY (-3% consensus), considering low tax rate in 3Q25 and higher AI investment. For game, we expect domestic revenue to grow 11% YoY while international revenue to decline 7% YoY. We expect ads revenue growth of 18% YoY given Video Account ads ramp up. For FBS, we expect revenue growth of 9% YoY given weak fintech (3% YoY) but offset by accelerating cloud (26% YoY). We forecast 3Q26 AI-related opex investment to be RMB12.5bn. Excluding AI investment, we expect adj. OP to grow 10% YoY in 3Q26. We keep our capex forecasts at RMB210bn/260bn/270bn in 26/27/28E, and expect quarterly cash pressure from compute to peak in 2026. We expect Tencent Cloud revenue to accelerate to 37% in FY27 and 45% in FY28. We expect Hy4 to launch soon, with Hy5 preview potentially within 4Q26;