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Tencent ( TCTZF ) plans higher AI spending in 2025, following 2024's

$10.7

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Q4 profit beats estimates on gaming surge, DeepSeek

integration

boosts AI app usage

(Adds details from a separate call to analysts in paragraphs

7-9)

BEIJING, March 19 (Reuters) - Chinese technology giant

Tencent ( TCTZF ) said on Wednesday it would boost capital

expenditure in 2025, as it strengthens artificial intelligence

development and infrastructure.

Tencent ( TCTZF ) President Martin Lau told reporters in a

post-earnings call that capital spending would rise to the "low

teens" as a percentage of revenue, with AI as a key focus of

strategic investments.

Capital expenditure for 2024 surged to $10.7 billion from

$3.4 billion a year earlier, to reach 12% of total revenue, Lau

said. The company spent 39 billion yuan ($5.4 billion) in the

fourth quarter on AI initiatives.

"We will continue to increase our AI investments, increasing

investment in our proprietary Hunyuan model while expanding our

contributions in multimodal and open-source capabilities," Lau

said.

The escalated spending aligns with similar large-scale AI

investments by China's other tech leaders. Alibaba ( BABA )

announced in February that it would allocate at least 380

billion yuan toward cloud computing and AI infrastructure over

the next three years.

Meanwhile, ByteDance, TikTok's parent company, has earmarked

more than 150 billion yuan for capital expenditure in 2025,

Reuters reported in January, largely focused on AI development

and computing power.

However, Tencent's ( TCTZF ) "low teens" capital expenditure

guidance for 2025 suggests that spending will remain flat as a

percentage of revenue compared with 2024, indicating a slowdown

in growth.

Chief Strategy Officer James Mitchell told analysts in a

separate call that the substantial increase in 2024 spending

should adequately address 2025 needs, noting that Tencent's ( TCTZF )

fourth-quarter capital expenditure exceeded that of any other

listed Chinese tech company.

Lau said the spending plans could be adjusted upward if

demand for services increases.

The company beat analyst expectations, posting revenue of

172.4 billion yuan ($23.83 billion) for the fourth quarter, up

11% on the year. Analysts had expected 168.9 billion yuan,

according to LSEG data.

Net profit was 51.3 billion yuan, compared with analyst

expectations of 46.3 billion yuan according to LSEG data.

The revenue growth was primarily fueled by robust

performance in the gaming segment, as the company benefited from

regulatory easing in China's gaming sector following stringent

restrictions in previous years.

For the quarter, domestic gaming revenue rose by 23% to 33.2

billion yuan, while international gaming revenue climbed 15% to

16 billion yuan.

Tencent ( TCTZF ) has accelerated its AI initiatives in recent months,

notably becoming the first major Chinese tech company to

integrate technology from DeepSeek, the Chinese AI startup that

gained prominence after releasing AI models that rival Western

counterparts at substantially lower development costs.

The DeepSeek integration has been rolled out across Tencent's ( TCTZF )

core products, including WeChat - the company's flagship

messaging and payment platform with over one billion active

users - and Yuanbao, Tencent's ( TCTZF ) proprietary AI assistant.

AI assistant Yuanbao has gained significant traction following

the DeepSeek integration, surpassing DeepSeek's own app to

become China's most downloaded iPhone application in early

March.

Daily active users for the platform rose by more than 20-fold

in the February-March period, leadership said in the

post-earnings call.

Beyond third-party partnerships, Tencent ( TCTZF ) continues to advance

its proprietary AI development, anchored by its Hunyuan large

language model.

Last month, the company launched an upgraded version of Hunyuan

called Hunyuan Turbo S, which it said can answer queries faster

than DeepSeek's flagship R1. And this week, it unveiled a suite

of new AI tools capable of converting text and images into 3D

visuals.

($1 = 7.2357 Chinese yuan)