Yamato: Tencent's target price is lowered to 725 Hong Kong dollars, anticipating a slowdown in growth of domestic gaming business in the last quarter.

Daiwa released a research report stating that upon reinspection of Tencent's performance last quarter, the group's domestic gaming business is expected to slow down due to seasonal factors and a high base effect, while the international gaming business is expected to stabilize after an exceptionally strong performance in the third quarter. Additionally, the recruitment of AI talent and GPU leasing costs will contribute to upward pressure on operating expenses. The bank stated that due to Tencent's overall weak revenue performance last quarter, the group's forecast for gaming revenue for the period was lowered, with expected revenue from local gaming business in the last quarter reaching 37.3 billion yuan, a 12% year-on-year increase, but a 13% quarterly decline. The bank revised down Tencent's earnings forecast per share for 2026 to 2027 by 1-2%, reiterating a "buy" rating, but reducing the target price from 750 Hong Kong dollars to 725 Hong Kong dollars.