Tencent’s AI Cloud Profitability: Low Token Prices, But Even Lower Costs
On August 12, during Tencent’s Q2 2026 earnings call, Chief Strategy Officer James Mitchell addressed the profitability of the company’s AI cloud business. He pointed out that while domestic token prices are indeed very low, the cost of producing tokens in China is also extremely low—far below what most people outside the industry typically assume. As a result, even with aggressive pricing, the token business still manages to maintain positive gross margins.
Mitchell further revealed that the gross margin from WorkBuddy’s paid users, as well as the margin from Tencent’s model services, has already reached a level comparable to Tencent Cloud’s overall gross margin. He acknowledged that WorkBuddy’s blended margin is somewhat lower, largely because it includes a segment of free users—Tencent is intentionally subsidizing that group to accelerate market share gains. However, the paid portion of the business is already generating a fairly impressive gross margin.