Citigroup: Optimistic about TENCENT (00700) Tencent's AI strategy is gradually taking shape, maintaining a "buy" rating.

Citigroup released a research report stating that Tencent (00700) management expressed satisfaction with the significant performance improvement of the Hybrid 3.0 model during the first quarter performance conference call in 2026. This is mainly due to the high token usage and close integration with key products within the company. Management pointed out that the integration with WeChat will gradually progress, and they are confident in expanding Hybrid 3.0 to larger models in the future, relying on actual use cases and feedback from internal business and products. After adjusting the forecast, the target price was revised down to 763 Hong Kong dollars. The "buy" rating is maintained, with continued optimism about Tencent's AI strategy gradually solidifying and the core profits maintaining sustainable growth. In addition to the AI business, Citigroup pointed out that Tencent's core business remains solid. Domestic and international gaming businesses continue to grow, with Evergreen game products reaching new highs. Tencent Cloud and marketing services are both performing strongly. Although GPUs are currently mainly allocated to internal demand, it is expected that domestic GPU supply will gradually increase in the second half of 2026, becoming an important growth catalyst for the cloud business.