Tencent misses revenue and profit estimates as AI spend rises despite strong gaming and ad growth

Market Performance

South African Market Summary

South African equities closed firmer yesterday, with the JSE All Share index rising 0.53% to 117,380.17 points and the Top 40 gaining 0.66% to 109,781.51 points. Sentiment was supported by news that South Africa secured a US$150 million development policy loan from the OPEC Fund for International Development, aimed at supporting reforms to ease infrastructure constraints while diversifying funding sources and limiting debt-service pressure. The loan carries a six-year maturity, two-year grace period and interest rate of six-month SOFR plus 1.25%. However, S&P Global Ratings warned that domestic political uncertainty and external headwinds remain key risks. Freight rail reform progressed as 11 private firms were approved to operate on the national network.

European Market Summary

European shares closed higher on Wednesday, with the pan-European STOXX 600 gaining 0.8% to 611.42 points as mining stocks led the recovery from the previous session’s losses. Sentiment was supported by a broadly resilient earnings backdrop, with first-quarter European corporate profits expected to rise 10.2%, marking the strongest growth in three years, according to LSEG-compiled data. However, investor caution persisted as markets assessed the economic impact of elevated oil prices linked to the Iran war. With crude trading above US$100 per barrel and inflation already more than one percentage point above the European Central Bank’s 2% target, economists increasingly expect the ECB to raise its deposit rate next month and at least once more this year.

US Market Summary

The S&P 500 and Nasdaq advanced on Wednesday, reversing earlier losses to close at fresh record highs as renewed strength in AI-related technology shares helped offset hotter-than-expected inflation data. Chip stocks rebounded from Tuesday’s weakness, supporting broader risk appetite despite growing expectations that the Federal Reserve may keep policy restrictive for longer. US producer prices rose 1.4% last month, the sharpest monthly increase in four years, as crude supply disruption linked to the Strait of Hormuz closure pushed oil-driven inflation into wider areas of the economy. The data reduced prospects for near-term rate cuts, while Boston Fed President Susan Collins signalled that further tightening remains possible if inflation persists. Kevin Warsh was confirmed as Fed Chair nominee.

Asian Market Summary

Asian stocks rose on Thursday, supported by renewed AI optimism, with South Korea’s SK Hynix nearing trillion-dollar valuation territory as demand for advanced chips continued to underpin sentiment. Investors also focused on high-stakes talks between US President Donald Trump and Chinese President Xi Jinping in Beijing, with discussions expected to cover the fragile trade truce, the Iran war and Taiwan-related tensions. In corporate news, Tencent reported first-quarter revenue and net profit below expectations as higher AI investment weighed on sentiment, despite continued growth in domestic and international gaming revenue. Japan’s Inpex raised its 2026 net profit outlook, citing stronger expected crude oil prices and a weaker yen amid Middle East-related supply disruption.

Currency Market Summary

The rand edged higher in early trade on Wednesday as investors monitored developments around a high-level meeting between US President Donald Trump and China’s Xi Jinping in Beijing. Global currency markets remained focused on the talks, with investors assessing prospects for economic agreements, the preservation of a fragile trade truce and broader geopolitical risks linked to the Middle East conflict. The dollar strengthened as elevated US Treasury yields supported expectations that the Federal Reserve could raise interest rates this year. Safe-haven demand also increased amid continued tensions between the US and Iran. Stronger US producer and consumer inflation data further underpinned the greenback. Meanwhile, sterling weakened and was on track for its first weekly decline in six weeks amid UK political uncertainty.

Commodity Market Summary

Gold prices were steady on Thursday as investors awaited developments from talks between US President Donald Trump and Chinese President Xi Jinping, while also monitoring prospects for progress in the Iran war. Oil prices moved higher, with markets focused on whether the high-stakes meeting could support efforts to ease the conflict, which has severely disrupted global energy supply. Trump is expected to encourage China to pressure Tehran into reaching a deal with Washington, although analysts doubt Beijing will push its long-standing strategic partner too forcefully. Supply concerns remained elevated after a Chinese supertanker carrying two million barrels of Iraqi crude exited the Strait of Hormuz, only the third tanker to do so since the war began. The IEA now expects a global oil deficit this year.

Domestic Company News

Universal Partners Limited (UPL) 0.00%

Universal Partners reported a reduced loss for the quarter and nine months ended 31 March 2026, while net asset value per share remained broadly stable year-on-year in sterling terms. NAV per share was £1.162 at period-end, compared with £1.173 a year earlier and £1.176 at 30 June 2025. In rand terms, NAV per share declined to R26.34 from R27.95, partly reflecting currency movements. The company recorded a quarterly loss of £133,668, substantially narrower than the £1.66 million loss reported in the prior corresponding quarter. For the nine-month period, the loss decreased to £1.0 million from £8.64 million. Universal Partners remains focused on high-quality growth investments across Europe, particularly the UK, having made six investments and completed two exits since listing.

Dipula Properties Limited (DIB) +0.57%

Dipula Properties delivered a stronger interim performance for the six months ended 28 February 2026, supported by growth in revenue, earnings and net asset value. Revenue increased to R809.2 million from R760.1 million, while distributable earnings per ordinary share rose to 30.55860 cents from 28.44660 cents. The REIT declared a higher dividend of 27.50274 cents per ordinary share, compared with 25.60194 cents in the prior corresponding period. Basic earnings per share improved to 28.37 cents, while headline earnings per share increased to 29.09 cents. NAV per ordinary share strengthened to R7.31 from R7.01, reflecting balance sheet resilience. Net profit before finance costs rose to R441.6 million, while attributable comprehensive income increased to R285.7 million.

Nutun Limited (NTU) -0.92%

Nutun expects a narrower loss for the half year ended 31 March 2026, supported by strong operational performance, particularly in Nutun South Africa. The simplified group remains focused on short- to medium-term profitability and sustainable long-term growth across its South African collections and recovery business and BPO offshoring operations. However, earnings were negatively affected by rand strength and accelerated amortisation linked to forward-looking macroeconomic assumptions, including a higher interest rate outlook. For continuing operations, the company expects a basic and headline loss of between R59 million and R68 million, improving from a R122 million loss in the prior period. Continuing basic and headline loss per share are expected at 7.5 to 8.6 cents, compared with 15.6 cents previously.

Global Company News

Tencent Holdings Limited (0700) +1.18%

Tencent Holdings reported first-quarter revenue and net profit below expectations as the Chinese technology group increased investment in artificial intelligence. Revenue rose 9% year-on-year to RMB196.5 billion, below forecasts of RMB198.96 billion, while net profit of RMB58.1 billion missed expectations of RMB61.42 billion. Growth was supported by gaming, with domestic revenue up 6% and international revenue rising 13%, helped by titles including Honour of Kings, Peacekeeper Elite and Delta Force. Online advertising revenue increased 20% to RMB38.2 billion, supported by AI-driven targeting. Tencent continues to raise AI spending, including proprietary models and its Yuanbao chatbot, although US restrictions on Nvidia chips remain a constraint. Management expects domestic chip supply to improve progressively.

Cisco Systems Inc. (CSCO) +2.60%

Cisco Systems raised its annual revenue outlook and announced plans to cut fewer than 4,000 jobs as it reallocates investment towards artificial intelligence and related growth areas. The networking equipment group said it has received US$5.3 billion in AI infrastructure orders from hyperscale customers so far this fiscal year, lifting its full-year order expectation to US$9 billion from US$5 billion previously. Third-quarter revenue reached US$15.84 billion, ahead of LSEG consensus of US$15.56 billion, supported by strong demand for networking products and data-centre switching. Cisco now expects fiscal 2026 revenue of US$62.8 billion to US$63.0 billion. The restructuring is expected to cost up to US$1 billion, with charges recognised through fiscal 2027.

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