A：Tencent is upgrading its AI capabilities, with the human foundation model's image D and 3D generation models becoming industry leading. This investment in AI is benefiting business areas such as targeting, engagement, and efficiency enhancement in coding and game and video production.

A：In the third quarter, revenue from value-added services (VAS) was 96 billion RMB, up 16% year on year. Social networks revenue grew 5% year on year to 32 billion RMB. Marketing services contributed 19% of total revenue, and FinTech and services made up 30% of total revenue.

A：Delta Force became the top three game in China by growth revenue. Tencent's response was to solidify its leadership position in music streaming and gaming through continued investment in growing WeChat's adoption and developing genetic AI capabilities within WeChat.

A：Music subscription revenue increased 17% year on year, driven by growth in ARPU and subscribers. However, long-form video subscription revenue decreased 3% year on year, with stable ARPU but a decline in video subscribers due to the delay of drama series 'Love's Ambition' following its release at the end of the quarter.

A：Domestic games revenue grew by 15% year on year, primarily driven by Delta Force, 'Honor of Kings', and 'Valorant'. International Games revenue increased by 43% year on year, or 42% in constant currency, due to upfront revenue recognition on top of copy sales of 'Dying Light: The Beau', and the consolidation of recently acquired studios.

A：Tencent is enhancing WeShop's transaction ecosystem by improving mini shop merchandise recommendations to increase sales conversions. It is using foundation model capabilities to better understand user interests and has introduced new features such as gifting capabilities and an upgraded image search feature to enhance merchandise discovery and user experience.

A：Tencent has introduced an AI feature in video accounts and official accounts that summarizes content and encourages users to ask follow-up questions. The feature has been well-received by users. Additionally, the 'tensor newsfeed' in WeChat was enriched with WeChat generated content to facilitate user exploration of news-related topics.

A：The release of 'Dying Light the Beast' contributed to international game revenue growing unusually quickly during the quarter due to upfront revenue recognition from cop sales, which had a positive impact on the company's financial performance.

A：The growth drivers for the marketing services revenue include ad spend growth from all major advertiser categories, an average ECPM increase year on year, and the introduction of an automated ad campaign solution, AI Marketing Plus, which helps improve return on marketing investment.

A：The business services segment saw year on year revenue growth in the third quarter, with the increase attributed to higher cloud services revenues and increased technology service fees generated from rising mini shops, e-commerce volumes, and revenue from cloud storage and data management products.

A：Operating profit grew by 19% year over year to 63.6 billion RMB, while net profit attributable to equity holders also grew by 18% year over year to 17.6 billion RMB, reflecting solid financial performance and growth in profit margins.

A：The overall gross margin for the first quarter of 2025 was 56%, which increased by 3 percentage points year over year. The fast gross margin was 61%, also up 4 percentage points year over year, mainly driven by greater contributions from certain internally developed high-margin games.

A：The accelerated growth in the international gaming business was attributed to the consolidation of newly and recently acquired game studios, as well as the recognition of upfront revenue from copy sales for the game Dying Light the Beast.

A：The full year CapEx guidance was updated to expect a lower percentage of CapEx as a ratio of revenue for 2025, while the amount of CapEx is anticipated to be higher than in 2024.

A：The company plans to continue seeking acquisitions of game studios, partnerships with overseas game studios, and bringing more Chinese-made games to global markets as part of its strategy for the international game business.

A：The Huan Yuan team is hiring top talent in research to complement the engineering team and is improving the overall architecture in various dimensions such as hardware, software, data preparation, model pre-training, and reinforcement learning. The Huan architecture complements other AI capabilities, such as Weixin, which has introduced AI features based on Huan's capability, like the video accounts and official accounts comment box and Tencent News Feed's content generation.

A：The automated ad campaign solution benefits advertisers by enabling them to automatically reach more performant inventories and user profiles compared to those they were manually targeting. It is particularly attractive to small to medium-sized businesses due to its ability to improve reach and efficiency without extensive legacy processes.

A：The company believes there is no insufficiency of GPUs for internal use and is confident in the progress made by the team in terms of talent recruitment and improvements in the Huan Yuan infrastructure. They do not believe a decisive better model exists as the race in China is close, and different models may excel in different use cases. The company remains optimistic about the improvements in the Huan Yuan capability and the increase in yuanbao engagement.

A：The company has already performed major organization optimization a few years back and the current organization is lean and efficient. AI adoption further enables the team to enhance performance rather than reducing costs.

A：Tencent is developing agentic AI capabilities within WeChat that includes an AI agent which can assist users with various tasks by leveraging the strong communication, social, content, commerce, and payment ecosystems that WeChat has. The goal is to create an ideal assistant for users that understands their needs and can execute tasks within the ecosystem.

A：WeChat is in the early stages of AI development and is taking a parallel approach by introducing Y (possibly Yu) capabilities into WeChat for standalone AI feature testing, enhancing search with AI for efficient user information needs, and starting work on vertical AGT capabilities that will be integrated one by one to eventually create a comprehensive AI integration scenario.

A：Tencent is making good progress in building the e-commerce ecosystem within WeChat, with mini-programs growing in terms of GMB. Future plans involve continuing to develop vertical AGT capabilities that may eventually integrate into the commerce ecosystem, potentially leading to an 'anti-commerce' feature within the AI agent.

A：WeChat has a good relationship with Apple and has collaborated on several areas, working with Apple to make the mini game ecosystem more vibrant. While details are not discussed, an official announcement may be expected in due course, which could have a positive impact on WeChat's business in mini games and domestic video games.

A：The company expects the advertising growth outlook to continue current trends as China consumer spending is subdued but gently improving, providing a gentle tailwind for advertising spending. The company will continue deploying AI capabilities like the Aim Plus program and automated ad campaign programs to support this growth.

A：The company is focused on how RD spending, especially as a percentage of revenue, and the impact on OPM will trend in the near and medium term, considering potential AI investments and their costs. The specific medium-term impact of these variables is not detailed in the provided text.

A：The improvement in gross profit margins has been attributed to a positive mix shift toward higher quality revenue streams and specific measures taken to optimize profitability in certain sub-segments like cloud. However, the speaker cautions against focusing too heavily on quarter-to-quarter changes due to the variability in costs, especially in the early stages of product development.

A：The company has been actively recycling its portfolio by selling investment holdings on the market and investing in emerging growth opportunities and its core focus areas such as games and digital content. Year-to-date, divestments have exceeded investments by over a billion dollars, and the company has been investing in AI startups, particularly in China.

A：In terms of revenue, the majority of mini-game revenue comes from in-app purchases rather than in-app advertising, according to the speaker.

A：When evaluating the growth rate of cloud revenue, one should consider the impact of macro-environment factors on the payment business within the FinTech sector. Additionally, it's mentioned that the growth rate may not necessarily be affected by capex (capital expenditure) as the growth rate is influenced by other factors within the payment business.

A：The slow consumption growth in China has been mainly due to consumers ramping up their savings during a period in which their balance sheet was dragged down by the decline in property prices. Unlike other economic downturns worldwide, this is not driven by excessive credit or bankruptcy, but by new individuals with resources choosing to save more instead of spending. If people feel more secure with their additional savings and property prices stop declining, there is potential for consumption to grow.

A：The payment business tracks closely with consumption growth in China. Factors influencing it include the overall balance sheet strength of households, as indicated by stock price movements, and consumer loans delinquency which is not being significantly affected due to people saving more rather than spending. Additionally, the underwriting practices of the company are conservative and data-driven, contributing to low delinquency rates.

A：The growth constraint for the cloud business is the availability of AI chips. When AI chips are in short supply, the company prioritizes internal use over renting it out externally. If there were a more available AI chip supply, the cloud revenue would be expected to grow more quickly.

A：AI implementation has led to roughly half of the advertising revenue growth due to higher ECPM primarily from AI-supported ad tech and close-loop benefits. The other half was attributed to increased impression volume reflecting increased user engagement and commercial payment volume trends. Without AI, the organic growth could have been different, but the specific impact of AI in reshaping conversion and pricing within the advertising business was highlighted as a significant factor.

A：The online payment volume has continued to grow steadily, even during weaker economic periods and more stable ones. The offline payment volume, which had been suppressed, has started to recover, narrowing the gap with online payment volume growth. Specifically, the retail and transportation sectors have seen volume growth, reflecting an increase in consumer activity and confidence.

A：WeChat and QQ serve different user groups and use cases compared to Facebook and Instagram. WeChat and QQ both integrate communication and social networks but have different network effects due to the dual nature of the platforms. In China, mobile orientation is more prevalent, whereas in the rest of the world, Facebook has more PC users. User demographics also differ, with WeChat serving younger users and QQ having a broader appeal to a younger audience. Going forward, WeChat aims to provide functionalities that meet the needs of a diverse user base, including interest-based groups and ways to connect with new people.