Tencent Reports Negative Free Cash Flow of 13.8 Billion in Q2, Capital Expenditure Reaches 52.78 Billion

In the second quarter, Tencent's capital expenditure reached 52.78 billion yuan, a year-on-year increase of approximately 176%, compared to 19.11 billion yuan in the same period last year. Free cash flow turned negative at 13.8 billion yuan. Operating cash flow was 52.7 billion yuan, with actual capital expenditure payments of 59.3 billion yuan, along with 5 billion yuan for media content payments and 2.2 billion yuan for lease liabilities. The cash flow includes a large prepayment for AI computing power, used for Hy model upgrades, WorkBuddy, CodeBuddy, WeChat AI, and cloud services. Excluding the prepayment, free cash flow would be 37.6 billion yuan. Q2 Non-IFRS operating profit was 75.6 billion yuan; if excluding Hy, Yuanbao, CodeBuddy, WorkBuddy, and small and micro enterprises, the profit could reach 86.1 billion yuan. New AI products this quarter dragged down operating profit by approximately 10.5 billion yuan.

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