Macquarie: Tencent Holdings has limited short-term profit improvement potential, target price lowered to HKD 559
Macquarie's research report indicates that Tencent Holdings' performance in the fourth quarter of 2025 is healthy, supported by its video accounts and resilient gaming portfolio; during this period, revenue and adjusted net profit grew by 13% and 17% year-on-year, respectively. The firm has lowered its adjusted earnings per share forecasts for Tencent for 2026 and 2027 by 1% and 3%, respectively, and reduced the target price from HKD 569 to HKD 559, maintaining a "Neutral" rating. It believes that the short-term profit upside is limited and expects the stock price to remain range-bound until substantial breakthroughs are achieved in AI-led initiatives. Management is shifting towards a capital-intensive catch-up phase, focusing on AI infrastructure, foundational models, and new product development. Although the firm believes this is the right move, in the short term, the potential for AI-enabled margin expansion may be offset by intensive capital requirements
According to a research report by Macquarie, Tencent Holdings (00700) is expected to have a healthy performance in the fourth quarter of 2025, supported by its video accounts and resilient gaming portfolio; during this period, revenue and adjusted net profit are expected to grow by 13% and 17% year-on-year, respectively. The firm has lowered its adjusted earnings per share forecasts for Tencent for 2026 and 2027 by 1% and 3%, respectively, and reduced the target price from HKD 569 to HKD 559, maintaining a "Neutral" rating, believing that the short-term profit upside is limited, and expects the stock price to remain range-bound until substantial breakthroughs are achieved in AI-driven initiatives.
Management is shifting towards a capital-intensive catch-up phase, focusing on AI infrastructure, foundational models, and new product development. Although the firm believes this is the right move, in the short term, the potential for AI-enabled margin expansion may be offset by intensive capital demands
