This article is written based on public information and is intended solely for information exchange, not constituting any investment advice.
In the investment community, "do not simply extrapolate the future from historical growth rates" is almost a consensus. High growth over the past decade does not guarantee high growth over the next decade. Industry cycle shifts, competitive landscape disruptions, regulatory policy adjustments, and technology route iterations—any single variable can cause an originally smooth growth curve to suddenly pivot.
However, this common sense must be viewed in the context of different development stages and company qualities. When an enterprise completes the era of incremental expansion through rapid market grabbing, and its core business enters a steady-state operation period with the growth center gradually converging and the fluctuation range continuously narrowing, the reference value of its historical trajectory actually rises significantly.
Tencent Holdings has precisely reached such a stage. After more than two decades of development and iteration, Tencent's core business landscape has become highly clear and stable. Its three core segments have successively passed the inflection point of explosive growth, shifting the growth logic from "expansion-driven" to "efficiency-driven," with trend stability far exceeding the industry average.
The gaming business has bid farewell to the domestic demographic dividend, entering a new stage of premium operation and global expansion; marketing services firmly rely on the fundamental base of the WeChat ecosystem, with Video Accounts opening a second growth curve; FinTech and Business Services are deeply bound to the digitalization pace of the real economy, transitioning from high-speed market grabbing to steady and in-depth cultivation.
For this very reason, we choose "linear extrapolation" as the baseline perspective for the entire analysis. It needs to be specifically clarified that the linear extrapolation here is by no means a mechanical deduction of applying formulas and calculating numbers. Instead, it is based on segmented business data from 2018 to 2026, combined with industry laws and operational rhythms, to provide a steady-state growth center under empirical judgment, building a baseline scenario without the impact of major variables.
The significance of this baseline lies not in accurately predicting the performance figures of a specific year, but in providing a value ruler for readers' reference; for growth rate judgments that one disagrees with, one can simply adjust them to form one's own judgment. Of course, we never believe that history will simply repeat itself, and AI strategic investment is currently Tencent's biggest "non-linear variable." Next, we will first dismantle the growth rhythm and profitability changes of the three major businesses to build a growth baseline framework, then overlay the long-term impact of significantly increased investment in computing power infrastructure, and finally land on investment value judgment.
01. Value-Added Services: Steady Recovery of the Growth Center
Evolution Chart of Tencent Holdings' Value-Added Services Revenue, Growth Rate, and Gross Margin from 2018 to 2025:
Data Source: Company Annual Reports
Value-added services are Tencent's most traditional fundamental base and also the segment with the largest historical growth rate fluctuations. From 2018 to the present, its growth trajectory has unfolded around three main lines: "product cycle + regulatory policy + overseas expansion," showing obvious pulse-like characteristics.
The suspension of game license issuance in 2018 directly slammed the segment's growth rate from 43% in the previous year down to 15%. In 2020, the dividend of the stay-at-home economy during the pandemic pushed the growth rate to rebound to 32%. In 2021-2022, the new regulations on preventing minors' gaming addiction coupled with the suspension of game license issuance again caused the growth rate to slide all the way to negative growth, until it gradually recovered in 2023. In 2025, relying on the explosion of multiple new products, it returned to double-digit growth of 16%.
Broken down, domestic games are the core fundamental base of value-added services and also the main source of fluctuations. In 2025, the revenue scale of domestic games reached CNY 164.2 billion, accounting for 45% of the entire value-added services segment, making it the largest single business sub-segment in terms of scale.
Over the past eight years, domestic games have experienced two complete cycles: the first was the mobile dividend driven by "Honor of Kings" in 2016-2017, and the second was the pandemic dividend catalyzed by "Game for Peace" in 2020, with the game license winter of 2018 sandwiched between the two rounds.
Following the regulatory adjustments in 2021-2022, the growth logic of domestic games has undergone an essential change—shifting from user quantity expansion to premium operation and ARPU (Average Revenue Per User) enhancement. As game license approvals return to normalization and the new product pipeline is gradually released, "Delta Force" in 2024 became a phenomenal hit, verifying the explosive power of premium content in a stock market. From the current product pipeline and industry rhythm, domestic games have walked out of the trough of regulatory adjustments and entered a new round of product release cycle.
Overseas games, on the other hand, have been the most certain source of incremental growth over the past five years. In 2025, overseas game revenue reached CNY 77.4 billion, accounting for 32% of total game revenue and 21% of the overall value-added services. From accounting for less than 20% of total game revenue in 2018 to increasing to 32% in 2025, the overseas market has transformed from a "supplement" to a "second growth curve."
Supercell's long-term operation and the global performance of "PUBG Mobile" have jointly driven overseas game revenue to maintain double-digit growth for consecutive years. Compared to the user ceiling in the domestic market, the global game market has broader space, and Tencent's R&D and operation advantages are continuing to be released. Under the baseline scenario where no extreme changes occur in geopolitics, the overseas market still has stable room for penetration.
Social network value-added services have long entered the stock steady-state stage. In 2025, the revenue scale was approximately CNY 127.7 billion, accounting for 35% of the value-added services segment. Its internal composition is mainly digital content value-added services, with the core carriers being the two major content platforms, Tencent Video and Tencent Music, as well as services such as live streaming and virtual props.
Currently, the long-form video industry has fully entered the stage of stock competition, with user growth peaking, membership penetration rates approaching the ceiling, and content procurement and production costs remaining high, causing continuous pressure on Tencent Video's revenue growth. Tencent Music, on the other hand, faces strong squeezing from Douyin's Qishui Music, with price wars and copyright competition intensifying in the online music industry, and traditional membership revenue growth basically stagnating. In 2018, the growth rate of this segment was still 30%, but by 2025, it had fallen back to 5%, showing the typical characteristics of a mature business.
Based on past development, the author judges that: domestic games, relying on the new product pipeline and ARPU enhancement, will maintain a growth rate of around 15%; overseas games, supported by global layout, will maintain a steady growth rate of around 10%; social networks enter a mature steady state, with growth rates basically matching the macroeconomy, taking a low single-digit growth of around 3%. In summary, the overall baseline growth center of the value-added services segment is about 8%-10%.
02. Marketing Services: Strong Certainty of Double-Digit Growth
Over the past eight years, the advertising business has gone through three stages: 2018-2020 was the traffic dividend period of Moments ads, where the high-speed growth of social ads hedged the decline of media ads; 2021-2022 was an adjustment period overlaid with multiple headwinds, where the "double reduction" in education, macroeconomic downturn, and short video competition exerted joint pressure, causing the segment's growth rate to fall from 20% to negative growth; from 2023 to the present, it is a new growth cycle driven by Video Accounts, coupled with AI technology empowerment, bringing advertising revenue back to the track of double-digit high-speed growth.
Evolution Chart of Tencent Holdings' Marketing Services Revenue, Growth Rate, and Gross Margin from 2018 to 2025:
Data Source: Company Annual Reports
To understand the core of Tencent's advertising, one must see clearly the scissors difference trend of "continuous growth in social ads and structural contraction in media ads." In the early days, Tencent's advertising was composed of social ads (Moments, Qzone) and media ads (Tencent Video, Tencent News). However, as user attention comprehensively migrated to the WeChat ecosystem, the user base of media ads continued to shrink, experiencing negative growth for consecutive years since 2019. In contrast, advertising scenarios within the WeChat ecosystem have been continuously expanding, from Moments to Mini Programs, and then to Video Accounts and Search, forming a multi-level advertising inventory matrix. This structural divergence is a long-term trend and will not be reversed.
In the current stage, Video Accounts are the core engine for advertising growth, and AI is the key variable for amplifying growth efficiency. The user time spent on Video Accounts is still continuously increasing, while the ad load rate is far lower than that of mainstream short video platforms in the industry, meaning that there is considerable room for growth just by increasing inventory. More importantly, AI technology is reconstructing advertising efficiency from the bottom up: on the one hand, improving click-through rates and conversion rates through precise targeting models to push up the unit price of ads; on the other hand, reducing advertisers' production costs and enhancing their willingness to place ads by generating creative materials through AI.
From the perspective of historical growth rates, the growth rates of the marketing services segment in 2023-2025 were 23%, 20%, and 19% respectively, stabilizing at around 20% for three consecutive years, which has verified the growth momentum of Video Accounts' commercialization and AI empowerment. Compared to the high growth rate during the early Moments ads dividend period, the quality of this round of growth is higher. There is not only an increase in advertising inventory but also an improvement in unit price and efficiency, making the growth more sustainable.
Based on past development, the author judges that the marketing services segment can maintain a 20% growth rate in recent years. As the business with the largest growth rate elasticity among the three major segments, marketing services will be an important driving force for Tencent's overall revenue growth in the next two to three years.
03. FinTech and Business Services: Coexistence of Ballast Stone and High Elasticity
Evolution Chart of Tencent Holdings' FinTech and Business Services Revenue, Growth Rate, and Gross Margin from 2018 to 2025:
Data Source: Company Annual Reports
FinTech and Business Services are the businesses with the highest growth certainty and the most thorough transformation among Tencent's three major segments. From a marginal role classified under "Others" before 2018, to being independently disclosed as one of the three core segments in 2019, and then proactively shifting from scale-first to profit-first in 2022, this segment has completed the transformation from rapid market grabbing to in-depth cultivation in eight years. Compared to the product cycle fluctuations of value-added services and the macro cycle fluctuations of marketing services, the growth trajectory of FinTech and Business Services is flatter and more resilient, serving as the "ballast stone" of Tencent's revenue.
Among them, the FinTech business is the stabilizer of the segment, mainly including commercial payments, wealth management services, and consumer credit. After years of high-speed penetration, the mobile payment market has entered a steady-state duopoly pattern. The room for growth in the user scale and number of transactions for WeChat Pay is limited, and the growth momentum has shifted from user penetration to transaction amount enhancement and service scenario expansion. Products such as Licaitong and WeLiDai are gradually maturing, contributing stable revenue increments. Overall, the FinTech business has entered a mature period, with its growth rhythm highly correlated with offline commercial activity and residents' consumption capacity, and the growth rate gradually converging to high single digits.
Business Services, on the other hand, are the source of elasticity within the segment, with the core being Tencent Cloud and merchant technology services. In the past, this segment was long in the stage of "burning money for scale," proactively undertaking low-profit projects to seize market share, resulting in large growth fluctuations and weak profitability. After strategic adjustments in 2022, Tencent Cloud abandoned low-quality projects and focused on advantageous industries, continuously improving profitability and achieving scaled profitability in 2025. At the same time, the rapid development of WeChat Store and Video Accounts e-commerce has also driven the growth of merchant technology service fees.
From historical performance, the growth rate of the FinTech business has gradually fallen back from high growth to a steady state of around 6%, conforming to the general law of the mature payment industry; Business Services have re-accelerated after strategic adjustments, with the growth rate rebounding to nearly 20% driven by AI. The combination of one steady and one fast has created the "steady but not dull" growth characteristics of the entire segment. The segment's growth rate dropping to as low as 3% in 2022 was the result of proactive strategic adjustments, not a deterioration in fundamentals; with the profit-first strategy taking effect and the AI dividend being released, the segment's growth rate has returned to a reasonable range of 8%.
Based on empirical judgment of linear extrapolation, the author gives different growth rate baselines for the two parts within the segment: the FinTech business maintains a steady growth of around 5%, matching the growth rates of the macroeconomy and commercial activities; Business Services, benefiting from the explosion of AI demand, maintain a relatively fast growth of around 20%.
In the 2025 annual report, Tencent Holdings disclosed that FinTech and Business Services revenue grew by 8% to CNY 229.4 billion, with FinTech growing at a high single-digit percentage and Business Services growing by nearly 20%. Calculating based on a 6% growth rate for FinTech, the author estimates the FinTech scale to be in the range of CNY 190 billion, and Business Services revenue to be around CNY 40 billion. In summary, the overall baseline growth center of the FinTech and Business Services segment is about 8%, combining certainty and growth potential, and serving as the core support for Tencent's steady-state growth.
04. Can Revenue Growth Support a CNY 500 Billion Computing Power Expansion?
Following the dismantling of the three major business segments in the first three parts, from the perspective of revenue structure, in 2025, the proportions of value-added services, marketing services, and FinTech and Business Services to total revenue were 49%, 19%, and 31% respectively. Combining the extrapolated growth rates of each segment and conducting weighted calculations, the steady-state growth center of the company's overall revenue is about 10%.
Trend Chart of Tencent Holdings' Revenue, Profit, and Valuation from 2016 to 2025:
Data Source: Wind, Company Annual Reports
Reviewing the evolution of Tencent's valuation over the past decade, a clear main thread runs through it all: the valuation center gradually moves down as the revenue growth rate steps down.
During the mobile internet dividend period from 2017 to 2020, the company's revenue growth rate was maintained at around 30%, and the market gave a growth valuation of 30-50 times PE, with high growth matching high premium; after 2021, impacted by regulatory shocks and industry growth rate shifting, the revenue growth center fell back, and the valuation center also fell back rapidly, gradually converging to around 20 times; at the current point in time, the price-to-earnings ratio corresponding to sustainable net profit is about 14.3 times.
Over the past three years, Tencent's net profit growth rate has consistently been significantly higher than the revenue growth rate, and the operating leverage effect is being continuously released.
This phenomenon of profits outpacing revenue is rooted in Tencent's massive fixed cost base. Cost items such as employee compensation and benefits, long-form video and game content costs, intangible asset amortization, and property and equipment depreciation are mostly rigid fixed costs, with an annual scale stabilizing at around CNY 270 billion.
During the current stage of medium-speed revenue growth, these fixed costs will not expand proportionally with revenue. The marginal cost corresponding to every additional CNY 10 billion of revenue is very low, and the profit elasticity will be much greater than the revenue elasticity.
The performance from 2023 to 2025 has verified this logic: the revenue growth rate went from 10% to 8% and then to 14%, while the corresponding operating profit growth rates were as high as 45%, 30%, and 17%, with the profit growth rate outpacing the revenue growth rate for three consecutive years.
Returning to the topic of this round of AI computing power expansion, we first dismantle the pressure from both the revenue and cost sides.
On the revenue side, based on the 2025 revenue of CNY 751.8 billion and calculated at a growth rate of 10%, the corresponding revenue increment in 2026 is about CNY 75 billion; the increment in 2027 is about CNY 83 billion.
On the cost side, the scale and cycle characteristics of AI computing power investment have gradually become clear. From the perspective of equipment purchase rhythm, the scale of equipment and apparatus added by the company in 2025 was CNY 87.5 billion; combined with the investment plans disclosed by management and the industry supply rhythm, it is estimated that the annual investment intensity will maintain at around CNY 200 billion in both 2026 and 2027. The cumulative computing power-related capital expenditures over the three years will approach CNY 500 billion, belonging to concentrated large-scale strategic investment.
Evolution Table of Tencent Holdings' Equipment and Apparatus Depreciation Accounts (Unit: CNY 100 million):
Note: The equipment added in the current year is calculated as being uniformly added in the middle of the year. Depreciation coefficient = current year depreciation / (net value at the beginning of the year + 0.5 * current year addition); the 2026 data is calculated based on an investment of CNY 100 billion in the second half of the year, and the 2027 data is calculated based on an investment of CNY 200 billion throughout the year, using the 2025 depreciation coefficient of 24%.
The author has compiled the equipment and apparatus data from annual reports over the years, combined with the latest disclosures from management, to create an evolution table of the impact of computing power depreciation. Since 2018, the scale of the company's equipment and apparatus has continued to expand, and depreciation provisions have grown synchronously. Combining the equipment purchase rhythm in recent years, depreciation useful life, and the investment plans disclosed by management, it is estimated that the equipment depreciation increment in 2026 will be in the range of CNY 25 billion, and the depreciation increment in 2027 will further expand to the range of CNY 32 billion.
In addition to hardware depreciation, bandwidth and server hosting fees, as well as advertising and promotion fees supporting AI businesses, will also grow synchronously with business expansion, further increasing pressure on the cost side.
In terms of scale, the revenue increment of the main business can cover the cost increment brought by computing power investment. However, considering that the expense ratio of incremental businesses is higher than that of mature businesses, if Tencent wants to maintain a profit growth rate of around 10%, it still needs to continuously promote cost reduction and efficiency increase in traditional businesses and optimize non-core expenditures. There is a certain amount of execution pressure overall, but it is not impossible to achieve.
If this baseline scenario is realized, the cumulative net profit increase from 2026 to 2028 will fall in the 33% range.
Of course, the core variable in all this lies in whether this round of CNY 500 billion-level computing power investment can ultimately be transformed into equivalent additional increments. If it only maintains a steady-state growth of 10%, then this is a defensive investment of exchanging cash flow for long-term competitiveness; if AI technology can bring unexpected breakthroughs and generate incremental revenue of CNY 50 billion or even CNY 100 billion level, that will be the core catalyst for breaking through the valuation ceiling.
In this wave of industry-wide AI investment, the effectiveness of Tencent's CNY 500 billion-level strategic investment, and whether the linear deduction and value judgment in this article hold true, will ultimately be verified by performance. We might as well wait until 2028 to see what kind of answer this layout facing the AI era will finally hand in.
(Author's WeChat Official Account: Dushulang's Wealth Notes. Welcome to leave a message after the article to communicate and discuss with the author.)