Tencent Holdings announced that for the second quarter of 2026, the company reported revenue of RMB 204.785 billion, up 4% quarter-over-quarter (QoQ) and 11% year-over-year (YoY); operating profit of RMB 67.28 billion, down 0.1% QoQ and up 12% YoY; Non-IFRS profit attributable to equity holders of the Company of RMB 68.415 billion, up 0.8% QoQ and 9% YoY; earnings per share of RMB 7.581, up 0.9% QoQ and 9% YoY.
Three Segments All Grow, Marketing Services Take the Lead
By business segment, marketing services revenue grew 22% YoY to RMB 43.565 billion, primarily driven by continued optimization of AI-powered advertising recommendation models, upgrades to the intelligent ad delivery product suite Tencent AIM+, and integration of closed-loop marketing capabilities within the WeChat ecosystem.
Fintech and business services revenue increased 9% YoY to RMB 60.286 billion, with fintech growth mainly driven by higher commercial payment, wealth management, and consumer loan revenues, while business services benefited from rising demand for AI-related cloud services, continued international market expansion, and improved pricing environment.
Value-added services revenue grew 8% YoY to RMB 98.414 billion, driven by growth in several major games.
Capital Expenditure Surges 176%, Cash Flow Turns Negative
As of June 30, the Group's cash balance stood at RMB 58.191 billion, with a significant decrease from RMB 146.86 billion in the first quarter, mainly reflecting capital expenditure of RMB 52.784 billion in the quarter (up 65.3% QoQ and 176.3% YoY) and dividend payments of RMB 41.6 billion for fiscal year 2025.
In the second quarter, the Group recorded negative free cash flow of RMB 13.8 billion. Although net cash generated from operating activities was RMB 52.7 billion, it was substantially offset by capital expenditure payments of RMB 59.3 billion, media content payments of RMB 5 billion, and lease liability payments of RMB 2.2 billion.
Tencent stated that the Group's operating cash flow includes significant AI-related prepayments used to provide infrastructure to support the upgrade of the Hy model, inference demands for WorkBuddy and CodeBuddy, WeChat AI initiatives, and AI capability building across various products and services, while also meeting continued growth in external customer demand for Tencent's cloud services. Excluding prepayments for computing power procurement, free cash flow would have been RMB 37.6 billion.
In addition, to enhance shareholder value in the long term, in the first half of 2026, Tencent Holdings repurchased a total of 50,031,100 shares on the Stock Exchange of Hong Kong for approximately HK$24.4 billion (before expenses) and the repurchased shares were subsequently canceled.
AI Empowerment Across Three Layers, Hy4 to Be Launched Soon
Tencent Holdings stated that entering the third quarter of this year, it is building a new, AI-empowered Tencent across three layers: intelligence, applications, and infrastructure.
At the intelligence layer, Tencent has already released the official version of Hy3 in July 2026, with performance significantly improved over the Hy3 preview version. It is said that Hunyuan Hy3 completed rapid iteration from preview to official release, with call volume increasing more than 68-fold over the previous generation model in its first week online. Hy4, with a larger parameter scale, is also planned for release in the near future.
At the application layer, WorkBuddy and CodeBuddy achieved breakthrough user growth and are leading in their respective fields in China.
At the infrastructure layer, the company significantly increased computing power procurement, which will help convert application and model usage into revenue.
At the same time, Tencent further refined its existing businesses, with marketing services revenue continuing to grow, several new games performing well, and WeChat Channels viewership growing rapidly.
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