Tencent, 2026 Q2 Earnings Results

01 Revenue, operating income and results versus expectations

Year over year · Revenue 25.508 → 30.094 B$ (+18.0% · +4.586 B$), Operating income 8.310 → 9.887 B$ (+19.0% · +1.577 B$).

Quarter over quarter · Revenue 28.382 → 30.094 B$ (+6.0% · +1.712 B$), Operating income 9.734 → 9.887 B$ (+1.6% · +0.153 B$), Operating margin 34.3% → 32.9% (−1.4%p).

Company-reported revenue growth was +11% in RMB terms. The main components were Marketing Services +22%, FinTech and Business Services +9%, and VAS +8%. Advertising services growth and a greater share of high-margin businesses supported gross margin of approximately 58%.

YoY and QoQ figures at the top are in B$, converted using each quarter's average exchange rate. Company-reported growth rates in the text are in RMB and may differ because of currency effects.

02 Earnings sustainability · From operating income to net income

IFRS operating income grew +12% in RMB terms, while company non-IFRS operating income grew +9%. Growth rates before and after adjustments are not used interchangeably as the same profitability measure.

Adjusted operating income excluding new AI activities was approximately 12.653 B$, versus total non-IFRS operating income of 11.115 B$. The difference is a company scope adjustment to explain the burden of new AI businesses, not the same as removing one-time accounting charges.

Investment and other gains of 1.644 B$ and losses from associates and joint ventures of 1.469 B$ affected net income. Distinguish operating performance in existing services from non-operating investment fluctuations.

Operating income

9.887 B$

Net non-operating income/loss

0.355 B$

Income tax expense

−1.721 B$

Consolidated net income

8.520 B$

Net income of 8.233 B$ in the existing quarterly data is attributable to the parent/shareholders. Its scope differs from consolidated net income used in the cash flow reconciliation.

03 Cash flow quality · Net income → OCF → FCF

Rounded disclosed components were OCF of approximately 7.74 B$, cash CapEx of approximately 8.71 B$, content payments of approximately 0.73 B$, and lease payments of approximately 0.32 B$. Company FCF was approximately −2.03 B$. Rounding in each original item may prevent exact reconciliation of the components.

Advance payments for computing procurement are cash outflows that reduced OCF. Company-presented FCF of approximately 5.53 B$ excluding those prepayments is a sensitivity illustration, not a replacement for actual FCF.

Consolidated net income

8.520 B$

Total net adjustments, including non-cash items and working capital¹

−0.774 B$

Operating cash flow

7.746 B$

Company-defined cash CapEx

−8.714 B$

Additional company-defined adjustments and disclosure rounding²

−1.060 B$

Company-defined FCF

−2.028 B$

¹ Total net adjustments calculated as OCF minus net income. This is not a single disclosed line item; it combines non-cash items, working capital, classification differences and other adjustments.

² Company-disclosed FCF and cash CapEx are broadly rounded in the original disclosure and are shown to approximately two decimal places in B$ in the text. The third decimal place in the reconciliation above is a calculation result, not the precision of the original disclosure.

FCF versus the previous quarter · approx. 8.19 → approx. −2.03 B$, a 10.22 B$ deterioration.

04 Financial capacity · Net debt and payment obligations

Net debt deteriorated by 9.972 B$ from the previous quarter. The carrying amount of current borrowings is 12.718 B$. This may differ from the principal maturity schedule.

The company's broader cash measure was approximately 75.34 B$, and company-defined net cash was approximately 8.58 B$. The common table below excludes non-current time deposits and other items, so its sign may differ from company-reported net cash.

Both the common liquidity measure including short-term investments and deposits less borrowings, and company net cash including long-term deposits and other items, are explained. Neither is concealed, and period-end figures using different definitions are not mixed.

Common definitions · Cash and liquid assets = cash equivalents + current investments and deposits. Borrowings = carrying amount of interest-bearing debt (current + non-current), excluding separate lease liabilities. This differs from total liabilities of 138.079 B$. Restricted cash, non-current securities and non-current deposits are excluded from cash and liquid assets.

05 Investment, capital allocation and cash recovery

Accrual-based CapEx of approximately 7.76 B$ differs from cash CapEx of approximately 8.71 B$. Timing differences between equipment recognition and cash payments or advances make it difficult to assess investment scale using a single number.

This quarter, cash CapEx/revenue was 29.0% and company-defined FCF/revenue was −6.7%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.

06 Next-quarter and full-year outlook and implications

Management described continued improvements to existing services and AI adoption alongside increased computing procurement. Current prepayments may support supply capacity in later periods, but do not guarantee revenue recognition timing or investment payback periods.

Quarterly results · CY-aligned view

Amounts in B$. The table shows all 4 quarters of the prior year and the current year's reported quarters, based on the report's CY-aligned year. Each fiscal quarter is assigned to the calendar quarter with the greatest overlap in its actual reporting period; the original FY/CY label and start and end dates are also shown. Amounts have not been recalculated into actual calendar quarters.

Indented rows are components of, or reference items for, the parent metric. Net cash = cash and liquid assets − borrowings. Depending on company definitions, FCF may include additional adjustments such as lease principal and therefore differ from operating cash flow − cash CapEx. See the cash flow discussion for the detailed definition.