Hong Kong-listed technology and internet giants are expected to deliver mixed financial results for the six months ended June 30, with the overall picture characterized by a mild recovery in revenue but a stronger repair in profits.

Faster growth in artificial intelligence and cloud computing, alongside easing price wars in parts of the sector, will lend support, while still-heavy AI spending and tepid consumption recovery continue to weigh on their performance, analysts said in interviews with China Daily.

Tencent Holdings is due to release its interim results on Wednesday, while JD.com will report its own results on Aug 13. Other closely watched names, including smartphone and electric-vehicle-maker Xiaomi and search engine operator Baidu, will report during the week of Aug 17.

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Xia Lulu, chief analyst for internet and media at Huatai Securities, said the gap in financial performance between different subsectors could be wider than expected.

He said investors should pay particular attention to local services, such as food delivery and in-store services, as well as AI cloud services. Local services are set to benefit from improving profitability as competition eases, while AI cloud businesses could see margin gains as demand for AI computing continues to rise.

“The accelerated iteration of domestic open-source AI models, and the narrowing capability gap with leading overseas closed-source models, have further improved the accessibility and cost-effectiveness of AI services in China,” Xia said. “With competition at the model layer still intense, we suggest investors focus first on midstream cloud providers with ample computing power reserves.”

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Tom Chan Pak-lam, permanent honorable president of the Institute of Securities Dealers, said some gaming and content segments are also likely to show greater earnings resilience, while e-commerce platforms could remain under pressure from modest consumer demand.

“Sector leaders with strong cash flows, active buybacks and a clear path to AI monetization are expected to have a relative advantage,” Chan said.

A key focus will be whether AI-related revenue is beginning to justify the sector’s heavy investment. Tencent’s research and development expenses rose 19 percent year-on-year to 22.5 billion yuan ($3.33 billion) in the first quarter. Alibaba has also said its AI infrastructure spending over the next few years could far exceed its previously announced 380-billion-yuan plan.

Xia said that while AI revenue has begun cushioning heavy outlays, the financial impact remains marginally visible. “A more meaningful contribution may not emerge until 2027 or 2028,” he said.

Firms that combine strong model capabilities, fast update speeds, and expanding cloud operations show a stronger ability to monetize AI, said Jason Chan, senior investment strategist at Bank of East Asia.

In the first half of this year, optimism over AI lifted major global equity markets, but Hong Kong missed out because of a lack of large semiconductor stocks. The Hang Seng Tech Index, which tracks the 30 largest technology companies listed in the city, fell 18.9 percent.

The trend reversed in July, with the benchmark jumping more than 8 percent.

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“This round of fund flow is better described as a shift away from ‘high crowding and high sensitivity to capital expenditures’ toward ‘low valuations, low expectations and cash-flow certainty’,” Xia said. “It is a rebalancing by the same pool of global technology capital.”

Compared with South Korea’s memory-chip companies, which are among the biggest winners of the global AI hardware cycle, Hong Kong-listed internet leaders have lower valuations, lighter institutional positioning, and more diversified earnings streams, he said.

Some companies also have strong free cash flow and have been improving shareholder returns through buybacks and dividends, making them more attractive to investors seeking certainty, Xia added.

Shares of food-delivery company Meituan rose more than 35 percent in July, followed by Xiaomi, with an increase of 33 percent. JD.com, Alibaba and Tencent also posted double-digit gains.

Tom Chan said that capital inflows have room to grow in the short term, fueled by heavy short positions and unfinished valuation repairs, but long-term sustainability hinges on these tech and internet stocks’ midyear earnings and tangible AI monetization. “Without that, this ‘high to low’ rotation remains a tactical adjustment rather than a structural shift,” he added.

Jason Chan said the Hang Seng Tech Index is expected to meet strong resistance in the near term, around 5,150 to 5,200 points.

From a valuation perspective, he said, the index is trading at a price-to-earnings ratio of about 24, slightly above its five-year median, meaning that it is no longer especially cheap.

Contact the writer at irisli@chinadailyhk.com