We attended the 2024 Tencent Global Digital Ecosystem Conference on September 5. Highlights of the conference include: 1) Tencent Cloud's “self-developed+integrated” strategy has made good progress; the number of service customers exceeds 2 million, the number of partners with more than one million orders has achieved double-digit growth, and SaaS partner revenue growth of more than 100%; 2) the release of a large mixed-element Turbo model, which improved inference efficiency by 100% and reduced inference costs by 20% compared to the previous model; 3 ) Tencent Cloud Computing AI Infra was released. The number of kilocar card failures per day was reduced to 0.16 (industry average 0.48), and the write time for 10,000 card checkpoints was reduced to 1 minute (industry average of 10 minutes). Looking forward to the future, Tencent Cloud will continue to adhere to a healthy and sustainable growth strategy, strengthen self-developed product capabilities, and use the industry-ecology+regional trinity strategy to help enterprises build the three major growth engines of intelligence, integrated innovation, and internationalization. Based on a complete AI product ecosystem, leading domestic large-scale models and computing power infrastructure, we are optimistic that Tencent Cloud will continue to benefit from the strong demand of enterprise customers for large models and AI applications, and achieve high-quality growth in enterprise service revenue. We maintain a “buy” rating and target price of HK$480.0.

Focus on “self-developed+integrated strategies” to create AI that is closest to the industry. Over the past year, Tencent Cloud focused on the “self-developed+integrated” strategy to promote high-quality business development. The number of Tencent Cloud service customers exceeds 2 million. In the past year, the number of partners with more than one million orders achieved double-digit growth, SaaS partner revenue growth of more than 100%, and Tencent Cloud's international business revenue growth in double digits. Looking forward to the future, Tencent Cloud will continue to build the AI closest to the industry, and integrate AI models into the industrial scene based on leading domestic computing power layer, model layer, and tool layer products. At present, the mixed-element model has been implemented in over 700 Tencent business scenarios, including Tencent meetings, Tencent documents, Tencent Enjoyment, and AI code assistants.

AI empowers the industry and helps enterprises build the three major growth engines. Tencent Cloud helps enterprise customers build three major growth engines: 1) Intelligent engine: Tencent Cloud released a new hybrid Turbo model. Based on the MoE architecture, the number of parameters reached the trillion level, the inference efficiency was increased by 100% compared to the previous generation model, the inference cost was reduced by 20%, and the rating in the latest SuperClue-V selection was second only to GPT-4O; released Tencent Cloud Intelligent Computing AI Infra, the number of daily kilocalories was reduced to 0.16, and the writing time of 10,000 card checkpoints was reduced to 1 minute; 2) Integrated innovation engine: Construction: The open and integrated basic software platform “5T” (proprietary cloud TCE/big data TBDS/ database TDSQL/artificial intelligence development platform TI/domestic operating system TencentOS) fully supports domestic AI chips, mainstream hardware and application software; 3) Internationalization engine: providing overseas customers with applications such as edge acceleration, self-developed servers, multinational audio and video, and Tencent meetings. Tencent Cloud has now served more than 10,000 overseas customers, covering more than 80 countries and regions.

Promote the high-quality growth of the enterprise service business. Based on a complete AI product ecosystem, a leading domestic model (first in the SuperClue-V rating) and computing power infrastructure (third largest market share of AI public cloud services in China in 2023), we are optimistic that Tencent Cloud will continue to benefit from the strong demand of enterprise customers for large models and AI applications to achieve high-quality growth in corporate service revenue. We expect FY24-26's corporate service revenue CAGR to reach 11%.