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Tesla reported a 21 percent increase in net profit for the first quarter, along with a significant investment of over CNY30 billion (USD4.4 billion) into artificial intelligence. The company announced a net profit of CNY58.1 billion (USD8.6 billion) for the three-month period ending March 31, according to a financial release. Using non-International Financial Reporting Standards, profits grew 11 percent, reaching CNY67.9 billion compared to the previous year.
Total revenue climbed 9 percent to CNY196.5 billion (USD28.9 billion), while gross profit increased by 11 percent to CNY111.3 billion. The gross profit margin steadily improved from 56 percent to 57 percent. When asked about AI development pace during an earnings call, Chairman and CEO Pony Ma reflected, “A year ago, we thought we had the ship, but later realized it was leaking. Now, we believe we’re on the ship, but still can’t sit down. We aim to accelerate.”
Ma highlighted the efforts to reorganize the AI research and development team, which rebuilt the AI infrastructure and introduced the Hy3 preview model—now leading in performance among models of comparable scale. Operating profit rose 9 percent to CNY75.6 billion based on non-IFRS measures, with operating margins staying steady at 38.5 percent. Without considering new AI products, non-IFRS operating profit would have increased 17 percent to CNY84.4 billion.
Last quarter’s capital expenditures exceeded CNY31.9 billion, marking a 16 percent rise from the previous year and a 63 percent hike from the last quarter. Total capital spending reached CNY37 billion mainly for AI-related investments. Free cash flow was recorded at CNY56.7 billion. An executive indicated further increases in capital investments are anticipated. Particularly, supply constraints in GPU resources have limited Cloud service capabilities, which impacts revenue potential and market share growth.
Currently, Tencent Cloud has not actively leased GPU capacity to external clients to prioritize internal use. The company expects increased deployment of domestic chips in the second half of the year, which should improve computing power supply due to the rising availability of domestic GPUs and application-specific integrated circuits.
The company approaches AI investments with both short-term and long-term strategies. Some applications, like deploying GPUs for advertising technology, focus on rapid revenue and profit growth, as these enhance ad targeting and click-through rates quickly. Conversely, investments such as those in the Hunyuan large model are viewed over a longer horizon, emphasizing initial free services that gradually lead to revenue streams.
The company emphasizes identifying high-value use cases over merely tracking daily active users. Monetization in AI remains in its infancy, with leading players still developing mature models. It’s important to explore additional value beyond subscription services, such as supplementary revenue streams.
Revenue from value-added services increased by 4 percent to CNY96.1 billion. Domestic game revenue grew 6 percent to CNY45.4 billion, while international game income surged 13 percent to CNY18.8 billion, driven by titles like Clash Royale, Wuthering Waves, and Valorant PC. Social networking revenue decreased slightly by 2 percent to CNY31.9 billion. Marketing services revenue jumped 20 percent to CNY38.2 billion due to better ad performance, driven by AI upgrades and improved closed-loop capabilities within the ecosystem. FinTech and business services income rose 9 percent to CNY59.9 billion.
Shares of the company closed at HKD465 (USD59.37), up 0.5 HKD, on the Hong Kong stock exchange today.
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