Wall Street Interprets Tencent Earnings: Core Business Stable, but AI Investment Cycle Extends, Profit Delivery Still Takes Time

Tencent's second-quarter core business remained stable, but capital expenditure surged to 52.8 billion yuan in a single quarter, free cash flow turned negative, and AI bills have materially impacted the income statement. Capital expenditure is expected to expand further in the second half of the year, with UBS estimates showing full-year capital expenditure expectations have been raised from 1.7 trillion yuan to 2.5 trillion yuan. Goldman Sachs, UBS, and two other major investment banks collectively cut earnings forecasts, with the core issue being whether the commercialization pace of the Hunyuan model, WeChat Agent, and WorkBuddy can keep up with continuously rising training and inference costs.