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 & 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 (vs. 10.5bn in 3Q25). Excluding AI investment, we expect adj. OP to grow 10% YoY in 3Q26. Our long-term view on Tencent: AI is not a single-product battle, but a long-term strategic war won through ecosystem scale, execution and sustained investment. Tencent's rapid catch-up in models and compute YTD could represent a significant turnaround. While NT profit pressure is understandable, we think the market is overly discou