JPMorgan Maintains Tencent Overweight With HK$690 Target Amid AI Investment Cycle

JPMorgan keeps Tencent overweight, targeting HK$690. Q2 revenue hit 204.8B yuan (+11% YoY). Analysts monitor AI ROI, noting profit trough in 2026 before expected recovery.

Woofun AI reports that JPMorgan maintained an "overweight" rating on Tencent Holdings (0700.HK) with a target price of 690 Hong Kong dollars. The firm identifies the current period as an AI investment cycle, projecting adjusted EPS growth of approximately 2% for 2026 before recovering to 10-15% by 2027 as AI revenues offset costs. Tencent's Q2 revenue rose 11% year-on-year to 204.8 billion yuan, with non-IFRS net profit increasing 9% to 68.4 billion yuan.

Cloud business growth accelerated to over 20% following May price adjustments, while marketing services and local games grew 22% and 17% respectively. Quarterly AI investments reached 10.5 billion yuan, up from 8.8 billion yuan in Q1. Although apparent free cash flow was negative at 13.8 billion yuan, adjusted free cash flow stood at 37.6 billion yuan after excluding hash rate prepayments. JPMorgan asserts that core business cash flows and equity portfolio sales can sustain these investments, citing potential catalysts including Hunyuan releases and WeChat Agent commercialization.