Tencent, Alibaba Earnings in Focus as China Tech Eyes Comeback

Investor focus is firmly on Tencent Holdings Ltd. and Alibaba Group Holding Ltd. this week, with both tech giants set to report earnings amid renewed hopes of a sustained rally in China’s tech sector.

Tencent is scheduled to report results later Wednesday, followed by Alibaba on Thursday. The reports are widely seen as key indicators of how China's tech companies are responding to evolving market dynamics, including tariff uncertainty, AI expansion, and domestic consumption shifts.

Optimism on AI, Caution on Trade

Expectations are high. The Hang Seng Tech Index has seen earnings estimates rise more than 30% over the past year, outperforming broader markets. However, the index remains 14% below its March peak, weighed down by concerns over US tariffs and Beijing’s economic stimulus strategy.

“This will be an exciting quarter for large tech,” said Kok Hoong Wong of Maybank Securities. “With DeepSeek’s February breakthrough, we’ll see how that filters into earnings and guidance — particularly from Alibaba.”

Revenue Growth Anticipated

Analysts forecast:

• Tencent: 17% year-on-year growth in advertising revenue, linked closely to macroeconomic conditions.

• Alibaba: Nearly 17% rise in cloud computing revenue, along with signs of accelerating momentum in its e-commerce division.

Both firms have increased investments in artificial intelligence, seeking to deepen user engagement and open new monetization streams. The focus will be on whether these investments have begun to show returns.

AI Spending and Capex Decisions

While AI remains a central theme, capital expenditures are expected to decline this quarter, according to Goldman Sachs. This reduction stems from uncertainties around access to foreign semiconductor technology amid trade tensions.

Lower capex could free up cash for share buybacks and investor payouts, but analysts warn it could slow AI infrastructure growth, critical for global competition.

“The US has led AI capex for over a year,” noted David Choa of BNP Paribas Asset Management. “Investors will watch closely how China responds.”

Focus Remains on Domestic Market

Despite the global attention, both Tencent and Alibaba continue to derive the majority of their revenue from Mainland China. Tencent earns about 90% of its income locally. Analysts say domestic economic performance remains a core factor in tech stock sentiment.

“The Chinese economy is still the key for investors considering higher allocations to Chinese tech,” said Roxy Wong of BNP Paribas.

Market Snapshot

• Alibaba shares: Up 53% YTD (Hong Kong listing)

• Tencent shares: Up 21% YTD

• Short interest: Dropped to under 0.1% of free float for both, from over 0.4% earlier this year

Options markets also show reduced demand for downside hedges, reflecting growing confidence among investors.

Conclusion

As China’s tech rally seeks firm footing following recent tariff relief talks, this week’s results from Tencent and Alibaba could determine whether investor optimism is justified — or premature. The earnings will provide clarity on AI growth, ad revenues, and consumer demand at a time when the sector remains under close watch from global markets.