(Yicai) Nov. 14 -- Chinese internet giant Tencent Holdings reported a 19 percent increase in net profit in the third quarter, buoyed by strong performances from gaming and marketing and accelerated gains from artificial intelligence investment.

Net profit totaled CNY63.1 billion (USD8.9 billion) in the three months ended Sept. 30, compared with CNY53.2 billion a year earlier, the Shenzhen-based firm said in its third-quarter earnings report released yesterday. Revenue jumped 15 percent to CNY192.9 billion (USD27.2 billion).

"During the third quarter, we achieved solid revenue and earnings growth, reflecting healthy trends across games, marketing services, and fintech and business services," said Pony Ma, chairman and chief executive officer of Tencent. "Our strategic investments in AI are benefiting us in business areas, such as ad targeting and game engagement, as well as in efficiency enhancement areas, such as coding, and game and video production," he added.

"We are upgrading the team and architecture of our HunYuan foundation model, whose image and 3D generation models are now industry leading," Ma pointed out. "As HunYuan's capabilities continue to improve, our investment in growing Yuanbao adoption, and our effort in developing agentic AI capabilities within Weixin, will gain further traction."

Domestic games revenue rose 15 percent to CNY42.8 billion in the period, primarily thanks to contributions from new games and increased earnings from evergreen games. Meanwhile, international games revenue soared 43 percent to CNY20.8 billion, mainly due to higher revenue from Supercell's games.

Revenue from marketing services climbed 21 percent to CNY36.2 billion, driven by higher advertising impressions, increased user engagement and advertising load, and improved effective cost per mille, buoyed by AI-powered advertising targeting.

Tencent deployed more advanced AI models to improve advertising ranking and conversion performance across Video Accounts, Mini Program, and Weixin Search, President Martin Lau said during the earnings conference call.

Moreover, the management highlighted strong momentum in Video Accounts, noting rapid growth in both advertising and e-commerce gross merchandise volume, as merchants increasingly adopt short-video formats for product discovery.

Revenue from fintech and business services grew 10 percent to CNY58.2 billion. Demand for cloud services improved, driven by recovering activity among internet clients and rising requirements for AI training and inference, according to Lau.

Overseas, Tencent continues to deploy top-tier graphics processing unit accelerators, such as A100 and H100, in its cloud and gaming operations. In the Chinese mainland, growth was capped by chip supply dynamics.

Tencent's capital expenditure dropped 24 percent to CNY13 billion in the third quarter from a year earlier. The topic was heavily discussed in the earnings conference call, with the management clarifying that the decline does not reflect a strategic shift but rather a change in the supply of AI chips.

"We have maintained a sizable reserve of top accelerators," Lau said, adding that capacity remains "adequate for ongoing training runs."

Despite the shrinking capital expenditure, the company's research and development spending surged nearly 28 percent to CNY22.8 billion in the period. The management attributed this largely to increased investment in AI-related projects and personnel.

Weixin's ecosystem continued to expand in the third quarter, with monthly active users exceeding 1.4 billion. AI-driven enhancements to Video Accounts, Mini Programs, and Weixin Search support higher commercial activity, according to the management.

Tencent is integrating its Yuanbao assistant into the comment and search functions to summarize content and boost interaction, the management noted. In the long term, the firm aims to build agentic AI experiences within Weixin to automate tasks, such as product selection and after-sales communication.

During the conference call, Lau confirmed ongoing discussions with Apple over in-app payments for Weixin, describing the talks as "constructive." Most revenue from Mini Games comes from in-app purchases rather than in-app advertising, he explained.

Looking ahead, Tencent's management expects continued growth in advertising and international gaming, supported by increased commercial activity in Video Accounts and Mini Programs, improving cloud demand, and sustained investment in AI.

The company plans to continue optimizing operational efficiency, maintain disciplined spending, and focus on long-term franchise development in global gaming, Lau pointed out.

Tencent [HKG: 0700] was trading down 0.6 percent at HKD652 (USD83.91) as of 10.30 a.m. in Hong Kong today, after earlier dropping as much as 2.2 percent.

Editor: Futura Costaglione