Tencent Music revenue rises 5.8% as Ximalaya, concerts drive growth

Tencent Music Entertainment reported Q2 revenue of RMB 8.93 billion, up 5.8 percent year over year, as music-related services and Ximalaya offset advertising pressure.

"Concerts, merchandise, and other IP-driven experiences drove another quarter of solid growth in our marketing and consumption services," Executive Chairman Cussion Pang said.

Music-related services revenue rose 11 percent to RMB 7.61 billion, with membership services up 8.1 percent to RMB 4.79 billion. Ximalaya, the audio platform acquired for US$2.4 billion and consolidated from May 18, contributed RMB 407 million. Marketing and consumption services grew 16.2 percent to RMB 2.81 billion, while social entertainment revenue fell 16.4 percent to RMB 1.33 billion.

Net profit attributable to equity holders was RMB 2.47 billion, compared with RMB 2.41 billion a year earlier, and diluted EPS was RMB 1.57. Adjusted EBITDA rose 5.2 percent to RMB 3.25 billion. Gross margin slipped to 44.2 percent from 44.4 percent, as a higher mix of lower-margin offline performance services offset efficiency gains.

The company repurchased 43.5 million ADSs for about US$400 million in the quarter, at an average US$9.2 per ADS, and held RMB 44.22 billion in cash and investments as of June 30. Management said it plans to complete its existing US$1 billion buyback program and is preparing a new repurchase program.

CEO Ross Liang said the company has begun adding premium audio from Ximalaya to its SVIP membership tier, which carries a monthly price of about RMB 40 versus RMB 8 for standard subscriptions. SVIP users showed faster growth in user base, ARPPU, time spent, and retention than lighter users, who have been more affected by competition.

Advertising faced headwinds from a challenging competitive and macro environment, CFO Shirley Hu said, as the company works to improve ad exposure, entry rates, and eCPM. For the second half, management expects gross margin to decline slightly year over year, with operating expenses rising moderately and adjusted EBITDA edging higher.

The company deepened partnerships with Dream Music Group and invested in South Korean label The Black Label, while staging concerts for artists including Zhou Yan, Tia Ray, and Steven Zhang. Nine of Ximalaya's top 10 new online-novel titles this year were produced in-house, management said.

The results show TME's pivot toward IP-driven concerts, merchandise, and long-form audio is offsetting a maturing subscription base and soft advertising. Investors will watch the second-half margin trajectory and the scale of the new buyback program as Ximalaya integration proceeds.

This article is for informational purposes only and does not constitute investment advice.