Tencent Stock Could Have Further to Run – Analyst Raises Price Target Following Earnings

Tencent Holdings Limited (TCEHY) has seen its stock garner increased attention following a robust third-quarter earnings report for 2025, prompting Barclays to raise its price target and maintain an Overweight rating. The positive sentiment reflects the company's strong financial performance and strategic advancements.

The market responded favorably to Tencent’s Q3 results, with Barclays increasing its price target to $102 from $77. This adjustment underscores confidence in Tencent's ability to control its financial trajectory, as the stock has already gained 56.6% year-to-date.

Tencent's Q3 2025 financials revealed a 15% year-on-year increase in revenue, reaching 192.9 billion yuan ($27.08 billion), surpassing market expectations. Gaming revenue played a pivotal role, with domestic gaming rising by 15% to 42.8 billion yuan and international gaming surging by 43% to 20.8 billion yuan, buoyed by titles like “Honor of Kings,” “Peacekeeper Elite,” and “Delta Force.” Advertising revenues also saw a significant boost, climbing 21% to 36.2 billion yuan, driven by AI-enhanced targeting capabilities. The company's net profit exceeded estimates, reaching 63.1 billion yuan against an expected 57.3 billion yuan.

Strategic investments in artificial intelligence have been instrumental in Tencent's recent success. The integration of AI across platforms, including WeChat and the Yuanbao chatbot, has enhanced ad targeting and gaming experiences. This commitment to AI is a critical factor in the company's sustained financial gains, with increased capital expenditure in this area.

Despite the overall positive performance, chip shortages have posed a challenge to Tencent's cloud business. The company has prioritized internal AI chip usage, which has somewhat constrained the growth of its cloud revenue by limiting the computing power available to external clients. Capital expenditure for the quarter was 13 billion yuan, down from 19.1 billion yuan in the previous quarter, reflecting a focus on efficient resource allocation. Tencent maintains a strong financial position with substantial cash reserves and an improved net cash position.

Analyst sentiment remains positive, driven by the combination of strong financial results, strategic AI investments, and effective cost management. The upward revision of the stock price target by Barclays reflects confidence in Tencent's continued growth trajectory. The company's ability to exceed expectations in key sectors, particularly gaming and advertising, coupled with its strategic focus on AI, positions it favorably for future growth.