Tencent's capital expenditure hit 52.78 billion yuan in Q2, up roughly 176% from 19.11 billion yuan a year earlier. That pushed free cash flow to negative 13.8 billion yuan.
Operating cash flow came in at 52.7 billion yuan for the quarter, but Tencent actually paid out 59.3 billion yuan in capital spending, plus 5 billion yuan in media content payments and 2.2 billion yuan in lease liability payments. The company says the cash flow figure includes a large prepayment for AI computing power tied to upgrades for Hy, WorkBuddy, CodeBuddy, WeChat AI, and cloud services. Exclude that prepayment, the company says, and free cash flow would still be 37.6 billion yuan.
Tencent's new AI products are clearly burning through cash. Q2 non-IFRS operating profit was 75.6 billion yuan; without Hy, Yuanbao, CodeBuddy, WorkBuddy, and Xiaowei, it would have been 86.1 billion yuan. By that rough measure, the new AI lineup dragged operating profit down by about 10.5 billion yuan in the quarter.