Internet giants’ 2025: hundreds of billions of yuan in profits evaporate, AI reshuffles the pecking order

Profit evaporates, rankings realign

China’s biggest internet firms closed 2025 with a sobering message: growth is slowing and profits are fragile. Tencent (腾讯), Alibaba (阿里) and Pinduoduo (拼多多) kept the top market-cap slots, but nearly half of the top-15 listed internet companies reported year‑on‑year profit declines. In aggregate, external battles for new user scenarios — above all the “takeout war” — and heavy AI spending reshuffled value across the sector, eroding hundreds of billions of RMB of annual profits.

Two strategies, two stories

The year exposed two distinct strategic paths. Tencent (腾讯) delivered scale and margin — RMB 751.8 billion in revenue and RMB 259.6 billion in net profit — while keeping AI capital expenditures relatively restrained (about RMB 79.2 billion). Alibaba (阿里), by contrast, leaned hard into AI and logistics, reportedly burning more than RMB 130 billion of profit in its push to build cloud and AI infrastructure; its stock nonetheless rallied strongly as investors rewarded the AI bet. Pinduoduo (拼多多) stayed conservative on AI, focused on supply‑chain investment and delivered an adjusted net profit of RMB 107.3 billion on RMB 431.9 billion revenue.

Delivery subsidies vs. AI infrastructure

How much value was destroyed by the delivery battle? It has been reported that Meituan (美团), Taobao Flash/Alibaba (淘宝闪购/阿里) and JD.com (京东) together spent roughly RMB 145 billion on subsidies over the year, and that in Q4 their combined daily meal orders were about 140 million — a period when scale came at steep cost. At the same time AI became the marquee growth variable: Alibaba (阿里), Baidu (百度), Tencent (腾讯) and Kuaishou (快手) accelerated model and cloud builds, with Qwen3‑Max and other in‑house models drawing attention — reportedly narrowing performance gaps with some closed global leaders. Stock markets rewarded AI momentum: Alibaba, Baidu, Kuaishou and Tencent posted double‑digit share gains that reflected investor conviction in AI as a re‑rating catalyst.

What to watch in 2026

Profitability, not just topline growth, will determine who stays on top. Entertainment and gaming — led by NetEase (网易) and Tencent Music (腾讯音乐) — remain high‑margin cash engines, while companies that overpay for marginal growth risk wiping out shareholder value. And there is a geopolitical overlay: export controls on advanced chips and cross‑border tech tensions make domestic AI infrastructure and chip autonomy strategic priorities for Chinese firms. Who can convert AI investment into sustainable, high‑margin revenue without repeating the heavy subsidy burns of 2025? That question will decide the next pecking order.