TCEHY Set to Report Q1 Earnings: What's in Store for the Stock?

Tencent TCEHY is scheduled to release first-quarter 2025 results on May 13.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 88 cents per share, unchanged over the past 90 days, indicating 18.92% year-over-year growth.

The Zacks Consensus Estimate for revenues is pegged at $24.26 billion, indicating a year-over-year increase of 8.89%. 

TCEHY surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with an average surprise of 11.65%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Tencent Holding Ltd. Price and EPS Surprise

Tencent Holding Ltd. price-eps-surprise | Tencent Holding Ltd. Quote

Let us see how things have shaped up for the upcoming announcement.

Key Factors to Consider for TCEHY

Tencent’s performance in the first quarter of 2025 is expected to have been shaped by multiple ongoing initiatives across games, advertising, fintech, and AI infrastructure. 

In domestic games, momentum from the fourth quarter of 2024 is expected to have been carried over, supported by evergreen titles like Honor of Kings, Peacekeeper Elite, Valorant and also contributions from recently released games, DnF Mobile and Delta Force. All five of Tencent’s highest-grossing games recorded year-over-year daily active users (DAU) increases during the 2025 Spring Festival period, suggesting sustained engagement. Deferred revenue, which grew by a high-teens percentage year over year in 2024, is expected to have contributed positively to the top line in the quarter under review.

In marketing services, revenues increased 17% year over year in the fourth quarter, with AI-driven enhancements to the advertising platform and strong advertiser demand across categories such as e-commerce, financials, FMCG, healthcare and education. Video Accounts Marketing Services revenues grew over 60% year over year, while Weixin Search ad revenue more than doubled. These trends are expected to have supported continued advertising growth in the quarter to be reported.

In FinTech, commercial payment revenues were flat year over year in the prior quarter, with volume of transactions rising but average selling prices under pressure. The same dynamics are expected to have continued in the first quarter, with consumer demand improving but supply-side pricing pressures still remaining.

The company reported that AI-native application Yuanbao saw rapid growth, with DAU increasing 20-fold from February to March. However, the revenue impact in the first quarter is expected to have been limited due to supply constraints in GPU availability. Increased allocation of GPUs for internal use initially limited external cloud services revenue, though installation activities during the first quarter are expected to have laid the groundwork for stronger growth in subsequent periods.

Tencent heavily invested in AI development in the fourth quarter of 2024, marked by a 21% year-over-year increase in R&D expenses and a 421% year-over-year rise in capital expenditure. The company intends to further increase both R&D spending and capital expenditures in 2025 to support AI infrastructure and model development across business groups. The bottom line in the first quarter of 2025 is expected to have reflected the increased R&D spending, driven by higher staff costs and GPU service depreciation related to AI initiatives.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the exact case here.

TCEHY has an Earnings ESP of 0.00% and a Zacks Rank #2 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies worth considering, as our model indicates that they possess the right combination of factors to exceed earnings expectations in their upcoming releases:

Capital Southwest CSWC currently has an Earnings ESP of +3.23% and a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Capital Southwest shares have plunged 8.3% year to date. CSWC is slated to report its fourth quarter fiscal 2025 results on May 14.

Baidu BIDU has an Earnings ESP of +8.67% and a Zacks Rank #3 at present.

Baidu shares have gained 3.1% year to date. BIDU is scheduled to report its first-quarter 2025 results on May 21.

Applied Materials AMT has an Earnings ESP of +1.94% and a Zacks Rank #3 at present.

AMT shares have gained 19.9% year to date. It is scheduled to report its second-quarter fiscal 2025 results on May 15.

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This article originally published on Zacks Investment Research (zacks.com).

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