Fitch affirms Tencent at ’A’ with stable outlook

Investing.com -- Fitch Ratings has affirmed Tencent Holdings Limited’s Long-Term Foreign- and Local-Currency Issuer Default Ratings at ’A’ with a Stable Outlook.

The rating agency also affirmed the China-based company’s senior unsecured rating, outstanding senior unsecured notes, and its $30 billion global medium-term note programme at ’A’.

Tencent’s ratings remain constrained by the Chinese sovereign rating (A/Stable) due to its predominantly domestic operations and high degree of government regulation in the internet sector. Without this sovereign cap, Fitch assesses Tencent’s standalone credit profile at ’a+’.

The affirmation reflects expectations that Tencent will maintain a strong business profile alongside a solid financial position. Fitch projects further improvement in profitability and robust operating cash generation that will more than cover higher growth capital expenditures.

Tencent has reduced its share repurchase target to at least HK$80 billion for 2025, down from HK$112 billion in 2024, demonstrating a balanced approach to shareholder returns and growth investments. Annual free cash flow is expected to remain above CNY120 billion, supporting modest gross leverage and a sizeable net cash position.

The company’s strong business profile is built on leadership across multiple segments. Tencent remains the world’s largest online games company by revenue, while its Weixin service is China’s largest mobile communication and social network. Weixin Pay leads China’s mobile payment services by active users.

Tencent’s gaming business showed strong growth in the first half of 2025, with domestic and international games revenue rising 21% and 29% year-over-year, respectively. International games now contribute approximately 30% of total games revenue.

The company’s marketing services revenue grew 20% year-over-year in the second quarter of 2025, driven by AI-enhanced advertising technology that improved click-through rates, conversions and monetization.

Fitch projects Tencent’s EBITDA to exceed CNY290 billion in 2025, with a 40% margin, supported by cost optimization and a shift toward higher-margin businesses. The company is expected to maintain EBITDA gross leverage of 1.3x-1.4x over the next few years.

Capital expenditure intensity will remain elevated as Tencent invests in graphics processing units, servers and infrastructure to expand AI capabilities, similar to global technology peers.

Fitch notes that Tencent’s variable interest entity (VIE) structure represents a credit weakness, as the company controls these entities through contractual relationships rather than direct ownership.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.