Tencent on Thursday said chip shortages were constraining the growth of its cloud business as China’s largest social media and gaming company prioritizes internal AI chip use over renting computing power to external clients.
The remarks, which came after Tencent posted strong third-quarter earnings, underscore how escalating U.S.-China technology tensions and export restrictions on advanced AI chips from suppliers such as Nvidia are hampering Chinese companies’ expansion plans.
“One constraint of the cloud business growth is the availability of AI chips. When AI chips are actually in short supply, we actually prioritize internal use as opposed to renting it out externally,” President Martin Lau said in a post-earnings call.
“The other way to say it, if there is not an AI chip supply constraint, our cloud revenue should be growing more.”
Q3 revenue beats analyst estimates
Tencent posted revenue of 192.9 billion yuan ($27.08 billion) for the three months ended September 30, better than the 188.9 billion yuan average of analyst estimates compiled by LSEG.
The growth was driven largely by strong gaming demand, with domestic gaming revenue rising 15% and international gaming surging 43%, while advertising revenue climbed 21%, boosted by artificial intelligence that improved targeting capability.
Tencent did not break out its cloud business, but its FinTech and Business Services segment, which includes cloud, rose a more modest 10%.
The company said capital expenditure for 2025 will be lower than its previous guidance, though still higher than 2024 spending.
Tencent previously said it expects AI-focused capital expenditure to reach the “low teens” as a percentage of revenue in 2025. Its 2024 capital expenditure was $10.7 billion.
Third-quarter capex totaled 13 billion yuan ($1.83 billion), down 24% from the same period a year earlier and 32% from the previous quarter.
AI as a key growth driver
Tencent has positioned AI as a key growth driver amid intensifying competition in China’s technology sector.
The company has integrated AI across platforms this year. It has embedded startup DeepSeek’s model into WeChat, its super-app used by over 1 billion people in China for messaging and payments.
The company has also launched Yuanbao, a ChatGPT-style chatbot that ranks among China’s most popular AI assistants alongside ByteDance’s Doubao.
Net profit climbed to 63.1 billion yuan, compared with a 57.3 billion yuan average analyst estimate, LSEG data showed.
Reuters
