HeadwaterCompany strategiesBuild yours

Tencent

A new, AI-empowered Tencent, From 2026

Tencent uses technology to enrich the lives of Internet users
About Tencent

A new, AI-empowered Tencent

Tencent runs Weixin and QQ, the biggest games business in China, an advertising business, Weixin Pay, and Tencent Cloud. It is using what those businesses earn to build what its chairman calls a new, AI-empowered Tencent, at three levels: intelligence, applications, and infrastructure.

ApplicationsIntelligenceInfrastructureHyWorkBuddyCodeBuddyXiaoweiYuanbao
Tencent12 August 2026

Accelerating progress

Hy is Tencent’s own family of AI models.

Hy4. Train a larger model, Hy4, for release later in 2026.

Stronger training. Keep improving Hy after pre-training with more powerful reinforcement learning, and widen what it can do beyond text.

Model and product together. Feed what more than 50 products learn from real use back into training, so each new version is designed with the products it serves.

  • Tencent released the full production version of Hy3 in July 2026. Since 7 July it has ranked among the top three models in the world by tokens used on OpenRouter.
  • Daily token use of Hy3 was about seven times the preview’s, across every channel, once customers paid for it.

Tencent’s existing businesses grew 11%

Tencent’s existing businesses made RMB204.8 billion in the second quarter of 2026. Tencent puts their growth down to AI and to moats: network effects, intellectual property, low take rates, regulation, and private data. Without the cost of its new AI products, operating profit rose 19%.,

RMB204.8bn

60.3+9%FinTech andBusiness Services47.3+17%DomesticGames43.6+22%MarketingServices32.5+0.8%SocialNetworks18.6−0.8%InternationalGames2.5+37%Others

  • FinTech and Business Services +9%

    Commercial payments, wealth management, and consumer loans grew; cloud grew faster, on AI demand.

  • Domestic Games +17%

    Delta Force and VALORANT PC reached their highest daily players yet; Roco Kingdom: World was the year’s top new mobile game in China.

  • Marketing Services +22%

    An AI ad recommendation model and the AIM+ campaign tool raised prices and impressions; Video Accounts carried more ads.

  • Social Networks +0.8%

    In-app items for games grew, and music subscriptions rose 8%, while long-form video subscriptions fell 6%.

  • International Games −0.8%

    Up 4% in constant currency: Wuthering Waves and VALORANT PC grew, and some Supercell games fell.

  • Others +37%

    Everything outside the four businesses.

Revenue in RMB billion. A packet is RMB2 billion, rounded to the nearest packet. Growth is the second quarter of 2026 on the second quarter of 2025.

Capital expenditure nearly tripled in a year

Tencent spent RMB51.8 billion of operating capital expenditure in the second quarter of 2026 and paid large sums in advance for more compute. Free cash flow fell below zero. Tencent says most of the spending is on infrastructure it could rent out through Tencent Cloud.,

Operating capital expenditure: a tray is RMB1 billion-200204060−13.8Free cash flow, RMB billion
Operating capital expenditure
RMB51.8bn
Operating profit, non-IFRS
RMB75.6bn
Without the new AI products
RMB86.1bn

The dashed hand is free cash flow before prepayments for compute, RMB37.6 billion. The new AI products are chiefly Hy, Yuanbao, CodeBuddy, WorkBuddy, and Xiaowei.,

  1. Let the core pay for the bet, and show both.

    Tencent reports its operating profit with and without its new AI products: up 9% with them, 19% without. We recommend reporting a new bet’s cost apart from the core business, so neither hides the other.

  2. Build the capability with the products that use it.

    Tencent trains Hy on feedback from more than 50 of its own products. We recommend wiring what customers do with a product back into the capability behind it, with someone owning that loop.

  3. Give a big investment a second use.

    Most of Tencent’s AI spending is compute it could rent out through Tencent Cloud if its own products needed less. We recommend asking, before a large investment, what else the asset could earn if the plan changes.

Sources

  1. 1. Tencent Holdings Limited (2026). Tencent announces 2026 second quarter results. Tencent investor relations, 12 August 2026. tencent.com
  2. 2. Tencent Holdings Limited (2026). 2026 second quarter results presentation. Tencent investor relations, 12 August 2026. static.www.tencent.com

Headwater is not connected with Tencent. Tencent, Weixin, WeChat, QQ, Hy, WorkBuddy, CodeBuddy, Xiaowei, and Yuanbao are trade marks of their owners. Updated 30 September 2026.

All company strategies