Tencent bought back 897,000 shares for HKD 550.8 million on Sept 8 - HKEX filing

Tencent bought back 897,000 shares for HKD 550.8 million on Sept 8 - HKEX filing

Tencent, one of the world's leading technology companies, has announced an aggressive share buyback program, signaling a strategic pivot to boost investor confidence amid market volatility. The company, which has been facing persistent undervaluation, has initiated a buyback program worth HK$80 billion, repurchasing 0.52763% of its capital by August 2025 [1].

The buyback program is part of Tencent's broader capital allocation strategy, which includes significant investments in AI infrastructure. The company has allocated RMB 27.5 billion to AI infrastructure, representing a 91% year-on-year increase, and maintains RMB 476 billion in cash reserves [1]. This dual focus on buybacks and AI investments reflects a disciplined approach to capital allocation, aiming to address immediate undervaluation while investing in future growth.

Analysts have responded positively to the buyback program, raising price targets and upgrading Tencent's fair value estimate. Morningstar, for instance, has upgraded Tencent's fair value estimate to HK$800, citing improved advertising revenue and strong earnings [2]. However, the stock still trades at a discount to this estimate, reflecting lingering concerns about regulatory risks and the long-term nature of AI monetization [1].

Tencent's buyback strategy has been executed during market downturns, with the company repurchasing 932,000 shares in August 2025 at prices ranging from HK$583 to HK$596 [3]. This approach aligns with Warren Buffett's principle of "buying when there’s blood in the streets," allowing the company to stabilize investor sentiment and outperform regional peers despite broader market volatility [1].

While the buyback program has generated optimism, risks remain. Tencent's management has acknowledged that AI projects may take 1–2 years to generate returns, and geopolitical tensions and regulatory scrutiny in China could impact growth prospects. However, Tencent's global expansion, such as its stake in a new Ubisoft subsidiary, demonstrates efforts to diversify risk and tap into international markets [1].

In conclusion, Tencent's aggressive share buyback program is a strategic masterstroke aimed at addressing immediate undervaluation while investing in long-term growth through AI. For investors, the key question is whether Tencent can sustain its current trajectory while navigating regulatory and geopolitical headwinds. Given its financial strength, efficient capital use, and improving AI monetization, the answer appears increasingly affirmative.

References:
[1] https://www.ainvest.com/news/tencent-aggressive-share-buyback-implications-investor-2509/
[2] https://www.morningstar.com/stocks/tencent-earnings-broad-based-strength-with-emerging-ai-upside
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_FWN3UQ0GW:0-tencent-bought-back-916-000-shares-for-hk-550-7-million-on-sept-3-hkex-filing-shows/