Tencent’s AI compute bill outgrew its cash flow, and the fallback plan is becoming a landlord
Tencent reported second-quarter revenue of 204.8bn yuan ($30.4bn) on Wednesday, up 11% and ahead of forecasts. Net profit came in at 56bn yuan against the 61.8bn analysts expected, CNBC reports. Capital expenditure rose 176% on the year to 52.8bn yuan, about $7.8bn. Free cash flow swung to an outflow of 13.8bn yuan.
Those four numbers describe one decision. The company is spending its profit on compute and telling investors to wait.
The number worth doing by hand
Put the two cash figures side by side. Tencent spent 52.8bn yuan on capital expenditure in the quarter. Free cash flow landed at minus 13.8bn yuan, Bloomberg reports. So operations did not generate enough to cover the infrastructure bill and the company’s other outgoings.
That is the quarter in one line. WeChat, the games, the advertising and the cloud between them did not cover the compute. A company that has printed cash for...
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