China consumer internet platforms. 0700.HK / BABA. Run 16 September 2026. Built from Tencent Annual Reports FY2023 to FY2025, the H1 2026 results announcement and the Q2 2026 call transcript (third-party); Alibaba Form 20-F FY2024 to FY2026 (fiscal years ending 31 March), Form 6-K filings through 4 September 2026 and the June quarter 2026 results release; cited industry data. Events swept through 16 September 2026; most recent event checked: Alibaba completed a HK$80bn placing of 710m new shares on 26 August 2026 (6-K). Figures in RMB, as reported, no FX conversion. Alibaba's fiscal year ends one quarter after Tencent's. Not a valuation and not a recommendation.
Tencent's next five years ride three cells whose drivers are already in place. China merchant marketing (RMB145.0bn, up 19%) grows on price, not ad load: AI targeting, AI-made creative and closed-loop ads into Mini Shops and Mini Games lift eCPM, and Video Accounts time spent grew over 20% in Q2 2026. Domestic games (RMB164.2bn, up 18%) compound on a portfolio of evergreen titles plus a pipeline that produced the top new mobile title of 2026 (Roco Kingdom: World). International revenue (RMB89.6bn outside the Mainland, up 38%) adds geographic diversification. Alibaba owns the single fastest large cell of either company, AI cloud (RMB48.4bn in the June quarter, up 45%, AI revenue up triple digits for twelve quarters), on the back of market leadership and in-house chips. But its largest cell, customer management revenue, grew 5% in FY2026 and 1% like-for-like in the June quarter, and quick commerce's 47% growth is revenue net of subsidies. The call is narrow because cloud could become Alibaba's second core. (Tencent AR FY2025, H1 2026 results; Alibaba 20-F FY2026, June Q 2026 release.)
Tencent's mix does the converting: incremental revenue arrives in internally developed games (VAS gross margin 64% in Q2 2026, up from 60%) and in AI-priced ads, while fintech and cloud gross margin climbed from 40% in 2023 to 51% in 2025 on scale. Alibaba's conversion runs the other way. Its growth cells are cloud (EBITA margin 9.0% FY2026, about 12% in the June quarter) and quick commerce (loss-making, inferred from the segment EBITA fall), and sales and marketing rose from 12% of revenue in FY2024 to 24% in FY2026. The growth winner and margin winner are the same company, but the finding worth keeping is sharper: Tencent's growth engine is also its margin engine, while Alibaba's best growth engine carries its thinnest positive margin. (Tencent AR FY2024, FY2025, H1 2026; Alibaba 20-F FY2026.)
Alibaba's exposure is merchant economics: customer management revenue depends on take-rate increases (a software service fee on GMV since September 2024) and, in the June quarter, on contra-revenue incentives to keep merchants, so a consumer slowdown or a further Douyin and PDD shift hits the one cell funding cloud, quick commerce and AI Labs (June quarter AI Labs loss RMB13.9bn). With free cash flow at minus RMB44.7bn in the June quarter and a HK$80bn equity raise already spent on AI intent, it has less room to wait. Tencent's exposure is concentration of approval and attention: domestic games need NPPA licences (freezes in 2018 and 2021 to 2022), and its AI build is a lump sum (capex RMB52.8bn in Q2 2026, net cash down from RMB146.9bn to RMB58.2bn in one quarter). Tencent breaks second because its core still self-funds and its losses are chosen, not competitive. (Alibaba 20-F FY2026, June Q 2026 release, 6-K 26 Aug 2026; Tencent H1 2026 results, Q2 2026 call.)
These six cells carry roughly 80% of combined segment revenue and nearly all of both companies' profit; every score is argued in the tabs below.
| Cell (product x region) | Tencent | Alibaba | Why (one clause, sourced) |
|---|---|---|---|
| China merchant marketing | 4 | 3 | Tencent grows 19 to 22% on price from a smaller share; Alibaba holds the largest share but grew CMR 1% like-for-like (Tencent H1 2026; Alibaba June Q 2026) |
| China cloud and AI infrastructure | 3 | 5 | Alibaba leads share (IDC H1 2025 25.6% vs 8.8%) and grows 45% at a rising margin; Tencent business services grew high teens (Alibaba June Q 2026; Tencent AR FY2025) |
| China games and social content | 5 | 1 | Tencent domestic games RMB164.2bn, up 18%; Alibaba's Lingxi Games and Hujing sit in a loss-making All others (Tencent AR FY2025; Alibaba 20-F FY2026) |
| China payments and fintech | 4 | 0 | Weixin Pay inside Tencent FinTech grew high single digit; Alibaba holds 33% of Ant Group by equity method, no consolidated fintech revenue (Tencent AR FY2025; Alibaba 20-F FY2026) |
| China local services and quick commerce | 1 | 2 | Alibaba revenue up 47% but net of subsidies and loss-making; Tencent routes traffic via Mini Programs with no own operation (Alibaba 20-F FY2026) |
| International (games / commerce) | 3 | 3 | Tencent international games up 33% in 2025 but plus 4% cc in Q2 2026; AIDC up 9% with loss narrowed to RMB2.1bn (Tencent H1 2026; Alibaba 20-F FY2026) |
Scores are anchored to the exhibits in the three tabs and are not summed; the lenses get their verdicts in the Three Answers above.
Normalization: Tencent reports four segments by product with gross profit as its segment measure; Alibaba reported four business groups with adjusted EBITA in FY2026, then regrouped in the June 2026 quarter into Alibaba E-commerce Group, AI Cloud and Compute Services, AI Labs and Applications, and All others. We align Tencent Marketing Services with Alibaba customer management revenue (both are merchant-paid marketing in China), Tencent FinTech and Business Services with Alibaba Cloud Intelligence (Tencent does not split fintech from cloud, so the bar is broader), and Tencent International Games with Alibaba's AIDC as the international cell. Alibaba segment revenue is shown before RMB89.6bn of inter-segment eliminations.
Scale flatters Alibaba. Its RMB1,023.7bn of FY2026 revenue is 36% larger than Tencent's RMB751.8bn, but about a third of Alibaba's pre-elimination segment revenue sits in first-party retail, logistics, wholesale and All others businesses, much of it booked gross (inferred: RMB386bn of RMB1,113bn), while Tencent's revenue is almost entirely digital. Geographically both are China businesses: Tencent earns 88% in the Mainland, and Alibaba's international group is about 13% of pre-elimination segment revenue.
| Cell | Tencent rev (% total) | Growth | Alibaba rev (% seg.) | Growth | Margin signal / leader |
|---|---|---|---|---|---|
| China merchant marketing | 145.0 (19%) | +19%; Q2 26 +22% | 343.9 (31%) | +5%; JunQ 26 -7% | Tencent GM 58%; Alibaba CEG EBITA margin 19.4% (38.0% FY25). Momentum: Tencent |
| Fintech and cloud | 229.4 (31%) | +8%; Q2 26 +9% | 158.1 (14%) | +34%; JunQ 26 +45% | Tencent FBS GM 51%; Alibaba cloud EBITA 9.0%, about 12% JunQ. Momentum: Alibaba |
| Domestic games | 164.2 (22%) | +18%; Q2 26 +17% | ND | ND | Tencent VAS GM 60%, 64% Q2 26. Leader: Tencent |
| Social networks and subscriptions | 127.7 (17%) | +5%; Q2 26 +1% | ND | ND | Mature; Tencent only |
| International | 77.4 (10%) | +33%; Q2 26 -1% (+4% cc) | 144.2 (13%) | +9% | Tencent inside VAS 60% GM; AIDC EBITA -1.4%. Leader on profit: Tencent |
| China 1P retail, logistics and quick commerce | 0 | - | 184.0 (17%) | +2% / +47% | Low or negative margin (inferred from CEG EBITA fall); Alibaba only |
| All other | 8.1 (1%) | +4% | 280.7 (25%) | -25% (disposals) | Alibaba All others EBITA -14.0% |
Merchant marketing. Tencent: Marketing Services grew on "pricing and ad impressions", with pricing helped by AI targeting and closed-loop ads, impressions by Video Accounts and Weixin Search, and "modest increases in ad load" (AR FY2025). Alibaba: FY2026 CMR growth was "driven by the improvement of take rate" (20-F FY2026), meaning price on a GMV base that is not growing fast, and the June quarter needed a merchant development program booked as contra revenue. Tencent's driver is more durable because it still has unmonetized surfaces; Alibaba's is a pricing lever it has already pulled.
Cloud and AI. Alibaba: external cloud revenue up 45% in the June quarter, AI-related revenue RMB12.4bn, and the segment now includes T-Head chips; the cost is capex of RMB126.1bn in FY2026 and RMB67.7bn in one quarter. Tencent: business services grew at a high-teens rate in 2025, capex primarily trains Hunyuan models and serves WorkBuddy inference first, cloud customers second (Q2 2026 call). Growth here is organic for both; Alibaba's is larger and more externally validated.
Games. Organic and portfolio-driven: evergreen titles (Honour of Kings, Peacekeeper Elite, Delta Force, VALORANT) plus new launches. The cost is content and studio R&D, both already in Tencent's cost base.
Tencent sells directly to consumers (game items, subscriptions) and to advertisers through its own auction; there is no intermediary between it and net price. Alibaba's customers are merchants who can move budget to Douyin, PDD or Tencent's own Mini Shops, and the June quarter shows Alibaba paying merchants back through contra revenue. In cloud the pricing environment improved for both: Tencent raised Tencent Cloud prices across the board in May 2026 and cut discounts (Q2 2026 call).
| Input | Tencent | Alibaba |
|---|---|---|
| AI accelerators | Procured; non-current prepayments, deposits and other assets RMB91.2bn at 30 June 2026 vs RMB24.5bn at December 2025 (Interim Report 2026, Note 20) | In-house T-Head Zhenwu chips, 650+ external customers (June Q 2026 release) |
| Content | Owned studios and licensed IP; content costs RMB69.6bn (AR FY2025 Note 7) | Merchant supply, not owned |
| Fulfilment labor | None | Fengniao rider network for quick commerce (20-F FY2026) |
| Memory and bandwidth | Bandwidth RMB32.0bn; passed through via cloud price rises | ND |
China internet advertising share, H1 2025: Taobao 22.5%, Douyin 19.1%, Weixin 10.8% (QuestMobile; approx., unverified, carried from prior research and not re-checked this run); Tencent is the share-taker, Alibaba the share-holder. China cloud IaaS plus PaaS, H1 2025: Alibaba 25.6%, Huawei 12.3%, China Telecom 11.4%, China Mobile 8.9%, Tencent 8.8% (IDC; approx., unverified, carried from prior research); Alibaba is the share-taker in AI cloud (Omdia, 38.1%, cited in Alibaba's June Q 2026 release). Quick commerce: Meituan, Alibaba and JD; share figures ND (Meituan and JD no longer disclose, Alibaba reports net of subsidies). Domestic games market RMB350.8bn in 2025 (GPC/CNG; approx., unverified), where Tencent is the leader.
Merchant marketing: AI assistants (Alibaba's Qwen app at 250m users, ByteDance's Doubao) move shopping intent off both feeds; Alibaba is more exposed because search-led P4P is its core. Cloud: token price commoditization; Alibaba more exposed because cloud is its growth thesis. Games: approval freezes; only Tencent exposed. Quick commerce: renewed subsidy war; only Alibaba exposed.
Weixin and WeChat social graph, 1,439m combined MAU in Q2 2026; a rival would need years of relationships, not money (durability High). Evergreen game portfolio and own studios, proven by Domestic Games reaching RMB164.2bn (High). Weixin Pay embedded in chat and Mini Programs (High, regulated).
Taobao and Tmall two-sided marketplace with Alimama consumer data and about 64m 88VIP members (Medium: shoppers multihome, share lost to PDD and Douyin over 2020s). Alibaba Cloud scale plus Qwen models and T-Head chips, first in China cloud (IDC) and 32% of enterprise model invocation (Frost and Sullivan, cited in 20-F FY2026) (High).
Tencent: no customer above 10% of revenue; consumers pay directly and advertisers bid in Tencent's auction, where AI targeting raised pricing in 2025 (AR FY2025). Alibaba: merchants pay CPC, CPM and CPS fees (0.1% to 5.0% on Tmall) plus a software service fee since September 2024; FY2026 CMR growth came from take rate, and June quarter CMR fell 7% after contra-revenue merchant incentives (20-F FY2026; June Q 2026 release). Pricing power exercised: Tencent raised ad pricing and cloud prices; Alibaba raised take rate, then paid part of it back.
Tencent: GPU supply constrained by US export controls, answered with large prepayments and model efficiency; content and bandwidth passed through via price (cloud price rise May 2026). Alibaba: T-Head gives dual sourcing for compute; quick commerce adds a rider cost base with Weak pass-through while subsidy competition persists. Alibaba was added to the US Section 1260H list in June 2026 (6-K 9 June 2026); Tencent has been on it since the January 2025 update (approx., unverified); neither designation bans investment.
| Cell | Route control | Pocket price | Continuity | Outcome (share / margin) | Confirming KPI |
|---|---|---|---|---|---|
| China merchant marketing | Both direct auctions; Tencent over owned attention, Alibaba over merchant GMV | Tencent rising (eCPM up); Alibaba take rate up then rebated | Both stable | Tencent share up, margin flat to up; Alibaba share flat to down, margin down | Tencent MS growth vs Alibaba CMR growth gap above 10pts |
| China cloud and AI | Both direct, enterprise | Both raising prices in 2026 | Alibaba stronger (own chips) | Alibaba share up, margin up; Tencent share flat, margin up | Alibaba cloud EBITA margin at or above 12% |
| International | Tencent via app stores; Alibaba via own marketplaces | Parity | Both exposed to tariffs and FX | Tencent flat after 2025 surge; Alibaba share up, margin toward breakeven | AIDC EBITA positive for a full fiscal year |
Tension named: Alibaba grows fastest exactly where it has pricing power and supply control (cloud), but that cell is still only 14% of segment revenue at a 9 to 12% margin, so the power it holds does not yet move group profit.
1. Owned attention vs merchant dependence (Major): Tencent monetizes users directly across social, games and ads; Alibaba monetizes merchants whose alternatives multiplied. Not closable by Alibaba with money; it would need a daily-use consumer surface, which is what the Qwen app and Taobao Instant Commerce are trying to build, a multi-year effort. 2. Gross revenue mix (Major): first-party retail, logistics and rider delivery sit in Alibaba's cost of revenue. Closable only by exit; disposals of Sun Art, Intime and Trendyol GO show it is under way. 3. Compute self-sufficiency (Moderate, Alibaba ahead): Tencent can partly close it within two to three years through procurement and efficiency, which makes it money-buyable and therefore a weaker moat.
Mapping: both present costs by function. Tencent's R&D sits inside general and administrative expenses, so we take R&D from Note 7 (RMB64.1bn, 70.7bn, 85.7bn) and define SG&A as selling and marketing plus G&A minus R&D. Tencent EBIT is IFRS operating profit, which includes other gains and losses. Alibaba R&D is "product development expenses" (includes some technology operating costs); SG&A is sales and marketing plus G&A; EBIT is US GAAP income from operations after amortization and goodwill impairment. Windows: Tencent calendar 2023 to 2025; Alibaba fiscal years ending March 2024 to 2026, a one-quarter offset.
| % of sales, 3y avg | Tencent | Alibaba | Gap | What drives it |
|---|---|---|---|---|
| COGS | 47.6 | 60.8 | -13.2 | Alibaba books 1P goods, logistics and riders gross |
| R&D | 10.9 | 5.9 | +5.0 | Tencent's digital revenue base is smaller; games and AI are R&D-heavy |
| SG&A | 12.1 | 20.9 | -8.8 | Alibaba buys users and merchants (S&M 24% in FY2026) |
| Gross margin | 52.4 | 39.2 | +13.2 | Mix: digital goods and ads vs gross retail and delivery |
| EBIT margin | 30.0 | 10.4 | +19.6 | Both of the above; Alibaba FY2026 at 4.9% |
| Year | COGS | R&D | SG&A | Gross margin | EBIT margin |
|---|---|---|---|---|---|
| Tencent 2023 | 51.9 | 10.5 | 12.1 | 48.1 | 26.3 |
| Tencent 2024 | 47.1 | 10.7 | 11.9 | 52.9 | 31.5 |
| Tencent 2025 | 43.8 | 11.4 | 12.3 | 56.2 | 32.1 |
| Alibaba FY2024 | 62.3 | 5.6 | 16.7 | 37.7 | 12.0 |
| Alibaba FY2025 | 60.0 | 5.7 | 18.9 | 40.0 | 14.1 |
| Alibaba FY2026 | 60.2 | 6.5 | 27.2 | 39.8 | 4.9 |
The most persistent difference is gross margin: 10.4, 12.9 and 16.4 points in Tencent's favor across the three years, and widening. The mechanism is the revenue mix mapped in the Growth tab, not efficiency: Alibaba's revenue includes first-party retail and logistics booked gross, and quick commerce delivery costs, while Tencent's incremental revenue is software, ads and virtual items. It implies Tencent's pricing power shows up where the power map says it should, so the cost data confirms the power map rather than contradicting it. The more telling second gap is SG&A, which at Alibaba jumped from 16.7% to 27.2% of revenue in two years: that is a choice to buy share in quick commerce and user experience, and a new management priority could reverse it, which is the one way Alibaba's margin gap narrows without a mix change. R&D intensity is the only line where Alibaba looks leaner, and that is a denominator effect of its gross revenue.
| Metric | Threshold | By when | If it hits, it favors | Where published |
|---|---|---|---|---|
| Alibaba customer management revenue, like-for-like growth | At or above +5% yoy | March 2027 quarter | Alibaba | Alibaba quarterly release |
| Alibaba AI Cloud and Compute EBITA margin | At or above 15% | June 2027 quarter | Alibaba | Alibaba quarterly release |
| Tencent Marketing Services revenue growth | At or above +15% yoy | Q2 2027 | Tencent | Tencent results announcement |
| Tencent new-AI-products loss (non-IFRS OP ex new AI minus non-IFRS OP) | Below RMB8bn per quarter | Q2 2027 | Tencent | Tencent results announcement |
| Alibaba quarterly free cash flow | Positive | December 2026 quarter | Alibaba (if missed, Tencent) | Alibaba quarterly release |