Highlights

• Tencent will report its 3Q26 results in mid-November. We expect Tencent’s revenue growth to remain solid at 9% yoy in 3Q26 despite macro headwinds, supported by stable gaming and resilient advertising driven by higher ad loads and improved eCPM. Operating profit is likely to remain flattish due to increased AI-related investment. We maintain overweight on Tencent, supported by resilient core franchises, attractive valuation and potential upside from Weixin AI agents.
   
• Maintain BUY with a lower target price of HK$537.00.

Analysis

• Moderating 3Q26 game revenue growth due to high base effect. We forecast 3Q26 games revenue growing moderately to 6.7% yoy to Rmb67.8b due to the high base effect from international games in 3Q25, but supported by resilient evergreen titles and a solid new-game pipeline. For instance, Battle of Golden Shovel’s Mainland China iOS revenue rose 45% mom in September, driven by anniversary events, with the title ranking second on the iOS grossing chart on 30 September. Social network revenue could expand 5% to Rmb33.8b amid softer digital content demand. We expect Tencent's 3Q26 revenue to rise 9% yoy to Rmb210.8b, while adjusted operating profit should be flattish yoy at Rmb73.1b.
   
• Online marketing services to remain resilient. Advertising should remain a key growth driver; we project that 3Q26 marketing services revenue will increase 18% yoy to Rmb42.7b, moderating from 22% in 2Q26. Overall momentum remains resilient, underpinned by continued enhancements in AI-driven ad targeting precision, which is expected to support both monetisation efficiency and margin expansion.
   
• Tencent Cloud likely to continue its solid momentum. Fintech and business services revenue is expected to grow 9% yoy to Rmb63.4b, as improving cloud demand partly offsets softer consumption-related fintech activity. We forecast cloud revenue expanding 23% yoy to Rmb15.7b, to reflect incremental AI cloud and enterprise application monetisation.
   
• Clearer AI strategy, although rising AI investment could weigh on near-term earnings. We expect Tencent Holdings (Tencent) to prioritise monetisation through enterprise AI tools and cloud services, supported by faster iteration of its in-house models, before scaling AI agents within Weixin. While we remain positive on Tencent's AI ecosystem and distribution advantages, higher depreciation and inference costs are likely to precede meaningful revenue contribution. We foresee 3Q26/2026 adjusted net profit dropping 5% yoy and 2% yoy.