Tencent Games Revenue Hits 118.7 Billion Yuan in H1 2025

Tencent Games Revenue Hits 118.7 Billion Yuan in H1 2025, Up 14% YoY; Management Unveils “AI-Native Games” Strategy

Tencent Holdings (00700.HK)  released its interim financial report, revealing that its gaming division generated total revenue of 118.7 billion yuan (RMB) in the first half of 2025, marking a 14% year-over-year increase and an 8% sequential growth. This performance exceeded market expectations (consensus estimate: 112 billion yuan), driven primarily by the global breakout success of DreamStar’s international version and record-breaking anniversary sales for DNF Mobile.

Key Business Metrics

Revenue Breakdown

Domestic market: 68.2 billion yuan (57.4% share), up 9% YoY

International market: 50.5 billion yuan (42.6% share), surging 21% YoY

Emerging growth: Mini-program game ad-sharing revenue surpassed 10 billion yuan (1.03 billion yuan) for the first time

Product Performance

Flagship titles: Honor of Kings and Peace Elite contributed over 30 billion yuan combined

Breakout hit: DreamStar reached 200 million global MAUs, with overseas revenue accounting for 47%

Legacy IP: DNF Mobile set a single-day revenue record of 530 million yuan during its anniversary event

Management’s Strategic Vision

Steven Ma, Senior Vice President of Tencent, unveiled the company’s “AI-Native Games” strategy during the earnings call:

1. Technology Roadmap

Proprietary “Hunyuan Large Model” gaming variant now integrated into 15 in-development titles

Plans to launch Genesis, the first open-world mobile game with “fully AI-dynamic narratives,” in 2026

2. Operational Transformation

All new titles from Q4 2025 will feature “AI NPC Social Systems” with memory and adaptive behavior

Existing games to adopt “real-time content engines,” shortening seasonal updates from 3 months to 2 weeks

3. Market Expansion

Additional 8 billion yuan investment in Middle East/Latin America server infrastructure

Collaboration with NVIDIA on “cloud gaming AI super-resolution tech” to reduce bandwidth costs by 30%

Competitive Landscape

Newzoo data shows Tencent’s global gaming market share rebounded to 21.3% (end-2024: 19.1%)

NetEase posted 18% YoY games growth (89.6 billion yuan) but trailed in absolute terms

miHoYo’s Zenless Zone Zero earned 2.7 billion yuan in its debut month, pressuring Tencent’s anime-style game segment

Tencent Game AI Lab’s Talent Surge

The 300% YoY expansion of Tencent’s Game AI Lab recruitment—far outpacing the industry’s 45% average growth (per LinkedIn)—signals three strategic priorities:

1. Generative AI Arms Race

60%+ new roles focus on real-time content generation and neural rendering (e.g., UE5 AI material synthesis engineers)

Aims to close the gap with rivals like NetEase’s “AI Holographic NPCs” in Justice Mobile

Targets 40% reduction in art production costs (per earnings call)

2. Gameplay Reinvention
   Lab Director Yu Dong hinted that “AI Game Designer” roles—requiring both ML and narrative design skills—will enable:

Genesis to generate quests directly from player voice input

AI-driven workflows to replace traditional level designer-programmer collaboration

3. Global Talent Acquisition

200 new hires in Silicon Valley (including 7 senior researchers from DeepMind/OpenAI)

Shenzhen HQ established “AI+Gaming” postdoc program with Tsinghua/HKUST

Top-tier compensation (median algorithm engineer salary: 1.5 million yuan, +35% YoY)

Risk Factors

Management highlighted:

• EU digital services tax may add 1.5–2 billion yuan in annual costs
• Q2 R&D expenses rose 34% YoY due to AI computing investments
• Operating margin declined to 38% (2024: 42%), with AI ROI potentially requiring 3–5 years
• Honor of Kings: World console version delayed to Q2 2026

Analyst Reactions

Post-earnings, 12 brokerages (including Morgan Stanley and Goldman Sachs) raised price targets, with average target at HK$485 (current: HK$412). Citi noted: “Tencent’s dual-engine model—legacy IP monetization + AI-driven cost efficiency—has alleviated growth concerns.”

(Data sources: Tencent interim report, Sensor Tower, Gamma Data)