Table of Contents

Financial Highlights

2018 Third Quarter
Total Revenue
80.6 billion RMB, +24% YoY
Net Profit attr. to Shareholders
Non-GAAP
19.7 billion RMB, +15% YoY
GAAP
23.3 billion RMB, +30% YoY
Diluted EPS
Non-GAAP
2.061 RMB, +15% YoY
GAAP
2.440 RMB, +29% YoY

Key Platforms Update

Weixin & WeChat
1,082 m, +10% YoY
QQ
Total:
803 m,
Smart Devices:
698 m, +7% YoY
Monthly Active Users as of 30 Sept 2018

Strategic Highlights

Embracing the Industrial Internet

  • Extend our “Connection” Strategy from connecting people, content and services to helping industries expand via digital channels
  • Enable industries to benefit from:
    • Mobile Internet ubiquity
    • Data insights
    • Applied AI
  • Position as a digital assistant to facilitate and empower our partners while respecting their independence
  • Tencent capabilities and infrastructure to support clients' upgrades:
    • High-traffic platforms connect industries with users
    • Enterprise services (Mini Programs, Official Accounts, WeChat Work, mobile payment) facilitate communications and transactions
    • Advanced technologies (cloud services, AI, big-data analytics) unlock data value
    • Large ecosystem with strategic partnerships offers industry knowledge and customer understanding, empowering customer-specific solutions

Strategic Highlights

Cloud Services

  • Fast growing and gaining market share
    • Revenue over RMB6 billion for 1Q-3Q18, more than doubled YoY
    • Further strengthening cloud services position in games, video and other Internet services, while advancing into finance, municipal, smart retail and industrial
    • Paying customers grew at a triple-digit rate YoY
  • Initiatives to sustain future growth
    • Technology - integrate our proprietary technologies into cloud-based solutions
    • Offerings - continue to expand products to more than 200 and industry solutions to over 70(IaaS, PaaS, SaaS, AIaaS)
    • Cost - scale and continuous cost optimisation enable cost-effective products and services
    • Customer acquisition -
      • Cooperate with over 4,000 channel partners (ISVs, strategic partners)
      • Unified sales teams, increasing efficiency in acquiring KAs
      • Leverage synergies from enterprise services, e.g. Mini Programs, to attract SMEs

Strategic Highlights

Smart Healthcare

Industry Status

  • Challenges
    • Under-resourced healthcare providers
    • Patients lack objective information about providers
    • Communication between healthcare providers and patients sporadic and disconnected
  • Solutions
    • Apply AI to enhance providers' capabilities (e.g. diagnosis)
    • Link patients to most relevant providers
    • Simplify and systemise provider-to-patient communications
  • Opportunities
    • Cloud and AI services to healthcare providers
    • Mobile payment adoption
    • Value-added services to patients

Strategic Highlights

Smart Healthcare (cont'd)

Tencent Offerings

  • For patients:
    • Hospital registration and video inquiry via Official Accounts and Mini Programs
    • Pay for treatment expense via Weixin Pay
    • Tencent Medipedia, an online medical resource, covering >1,000 symptoms, serving Weixin, QQ, Mobile QQ Browser users
  • For medical industry:
    • Tencent AIMIS has read >100 million films and served >1 million patients, assisting doctors in polyps screening and diagnosis
    • Security, cloud computing, AI and big-data analytics capabilities to strengthen staff management and patient-relationship management

Strategic Highlights

Smart Transportation

Industry Status

  • Trends & Challenges
    • In-car connectivity
    • Electric vehicles
    • Autonomous driving
    • OEMs desire to connect more closely with customers
    • Transport-as-a-service
  • Solutions
    • In-car internet services, voice user interface, location, navigation and AD assisted driving
    • OEMs: cloud-based solutions and CRM
    • Public transportation companies: cloud-based solutions
  • Opportunities
    • Cloud services for OEMs and transportation companies
    • Expanding use cases for digital content
    • Marketing for cars and related services

Strategic Highlights

Smart Transportation (cont'd)

Tencent Offerings

  • For drivers/passengers:
    • Integrate Weixin and our digital content services, e.g. music, video, reading, into vehicles’ smart systems
    • Transit QR Code based on Mini Programs serves over 50 million passengers in 120 cities
  • For transport industry:
    • Tencent LBS: over 60 billion daily location requests, empowering car navigation
    • Tencent Auto Intelligence (TAI): in-car internet service ecosystem with 15 OEMs
    • Tencent Autonomous Driving (TAD): HD map, simulation, cloud computing and security

Revenue Mix

Social
Networks
Online
Games
Online
Advertising
Others

Value Added Services Revenue

in billions, RMB
Online Games
Social Networks

Online Advertising Revenue

in billions, RMB
Media
Social and Others

Segment Gross Margin

VAS (%)
Online Advertising (%)
Others (%)

Operating Expenses

S&M
in billions, RMB
R&D
in billions, RMB
G&A excl. R&D
in billions, RMB

Margin Ratios

GAAP Gross Margin (%)
Non-GAAP Net Margin (%)
Non-GAAP
Operating Margin (%)

CAPEX and Credit Metrics

2018 Third Quarter
Total CAPEX
6.0billion RMB,
+71% YoY
Total Debt
173.7billion RMB,
+32% YoY
Debt to (adj.)
EBITDA ratio
1.53x(annualized)
Free Cash Flow
26.4billion RMB,
-4% YoY
Net Debt
29.2billion RMB
Fair Market Value of
our listed investee companies*
273.1billion RMB

*Excluding subsidiaries

For More Information

Investor Relations