Tencent Music Entertainment Group (TME) Q4 and Full Year 2025 Earnings Call Transcript

Date: March 17, 2026 | Source: Company IR (ir.tencentmusic.com) — official transcript

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Millicent T. (Head of IR, Tencent Music): Good evening, good morning, and welcome to Tencent Music Entertainment Group's Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm Millicent Tu, Head of IR. We announced our quarterly financial results earlier today before the US market opened. The earnings release is now available on our IR website and via Newswire services. During today's call, you'll hear from Mr. Cussion Pang, our Executive Chairman, and Mr. Ross Liang, our CEO, who will share an overview of our company's strategies and business updates. Then Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the Safe Harbor statement in our earnings release, which applies to this call as we'll make forward-looking statements. Please note that we will discuss non-IFRS measures today. With that, I'm pleased to turn the call over to Cussion.

Kar Shun (Cussion) Pang (Executive Chairman, Tencent Music): Thank you, Millicent. Hello everyone and thank you for joining our call today. In 2025, we remained disciplined in executing our dual engine content-and-platform strategy, delivering accelerated revenue growth and sustained margin expansion. Our differentiated, all-in-one music services platform has fueled solid subscription growth and strong momentum across our non-subscription offerings. This enables us to unlock greater value from music IPs, create new opportunities for artists, and address a larger market. As the competitive landscape continues to evolve, our proven ability to deliver integrated, expansive and multi-faceted services gives us a distinct competitive advantage. With disciplined investment and continued innovation focused on long-term value creation, we are confident in leading the industry advancement.

Our competitive edge first and foremost stems from our industry-leading music copyright portfolio. Building on our high-quality IP assets, we have expanded a comprehensive suite of music services to create holistic value for music creators and contribute to the long-term growth of the music industry. First, our timeless and classic music catalog fosters deep emotional connections and serves as a cornerstone of our subscription business. We recently renewed contracts with Warner Music Group and Bin-music, exploring new avenues for physical albums, merchandise, and live performances. We also deepened our alliance with Media Asia Music, introducing Dolby Atmos to over 300 iconic tracks by legendary artists including Eason Chan, Leslie Cheung and Andy Lau, for the first time.

Second, we continue to deepen differentiation through our proprietary content. The streaming share of our self-produced content keeps growing. Our Mid-Autumn-themed hit "Year After Year," performed by Xiao Zhan, charted in 17 countries and regions and generated over 100 million social media views in a single day. In the fourth quarter, we produced a bespoke 14-track OST suite for Tencent Video's hit drama "Shine on Me," which topped multiple music charts during the drama's broadcast. In addition, several of our co-produced songs were featured on the 2026 CMG Spring Festival Gala, which then quickly went viral, with multiple tracks surpassing 10 million streams in just a few days.

Third, we continued to gain share among younger users, thanks to our coverage of genres that resonate well with this user cohort. K-pop, for instance, is capturing an increasing share of streams. Our recently renewed partnership with P NATION secured a 30-day head-start benefit to new releases from top Korean artists and groups such as PSY, CRUSH, HWASA, BABY DONT CRY and TNX. Our thriving Tencent Musician Platform is also vital to meeting the growing appetite of young audiences.

Beyond music subscription, we see tremendous potential in other music-related value-added services. First, building on our momentum, we continued to push boundaries by hosting more high-quality live experiences. In 2025, we showcased our production capabilities with multiple flagship events, including G-DRAGON's world tour. The 20-concert tour across eight cities in Asia Pacific attracted over 260,000 fans. This highly sought-after tour featured two landmark shows at the Taipei Dome in the fourth quarter, drawing over 75,000 fans — the largest-scale event we have hosted for him. Second, through continuous investment across the music value chain, we have built a diverse and robust lineup of strategic artists, collaborating across music promotion, live performances, artist management, and merchandise. Our strategic artists portfolio includes HaiLaiAMu, Will Pan, Fiona Sit, Silence Wang, Kenji Wu, Tia Ray, Jane Zhang, Angela Zhang, Zhang Yuan, and GAI. Third, beyond live events, we continue to introduce innovative merchandise formats. A prime example was the KIT album for Ed Sheeran's latest release, Play, marking our first partnership with a top-tier Western artist using this hybrid physical-digital format. We more than doubled revenues of IP-related merchandise and fan-based consumption as we exited 2025.

As advertising and other IP-related offerings scale, and as we offer multi-tiered membership for online music subscriptions, the business impact of each paid membership varies. Given the significant evolution of our business model in recent years, our focus has moved beyond the number of paid subscribers and ARPPU. Reflecting this shift, starting from next quarter, we will discontinue the disclosure of certain operating metrics on a quarterly basis. Going forward, we will report annually the number of total paying users across our music services, as of year-end. Now I would like to hand the call over to Ross for a deeper dive into our overall platform development.

Liang (Ross) Zhu (CEO, Tencent Music): Thank you, Cussion. Hello, everyone. In an era of rapid technological advancement and evolving consumer expectations, we stayed nimble, acting proactively across the board to serve our users better and keep the flywheel of our content platform rolling. We have built a comprehensive, multi-pronged membership system designed to drive effective subscriber conversion, stronger engagement, and a deeper share of wallets. We ended 2025 with over 20 million SVIP users, with ARPPU trending steadily upward. Our new ad-supported subscription plan is also gaining initial traction. Over time, it will allow us to broaden user access and attract new audiences to our platform.

Every user listens differently. That's why we continue to innovate our products, broaden our user reach, and enrich our membership offering. Enhanced content discovery features such as swipe types and video feeds help users explore more relevant content in a more engaging way. Newly introduced 3D audio also allowed premium users to experience premium sound quality from their very first listen. Thoughtful application of AI also made music discovery more intuitive and personalized. We upgraded our AI agents across QQ Music and Kugou, enabling them to better understand nuanced user intent. The AI agents can now instantly create personalized playlists tailored to users' listening needs in the moment.

We are delivering great services is a foundation; reaching more users is equally important. We are continuing to deepen our integration with the Tencent ecosystem to expand our presence across more user touch points. First, we deepened our cooperation with Weixin Video Accounts by bringing leading labels, top artists and independent musicians into its ecosystem, creating a more seamless journey from music discovery to full track listing on TME. We also integrated with Weixin's AI agent. Together, these initiatives are expanding our user reach, improving engagement as well as enhancing content distribution across the Tencent ecosystem. Second, we are also extending our user reach beyond mobile and PC into cross-device listening scenarios. During the quarter, we broadened our smart vehicle coverage through deeper collaborations with leading automakers, including Changan, Li Auto and Xiaopeng, and introduced AI-powered search to deliver a smarter in-car experience. We are also among the first music platforms to integrate with HarmonyOS.

Finally, we are further elevating the SVIP value proposition by transforming it into a multidimensional experience centered on IP engagement. Premium music remains at its core, now complemented by a growing portfolio of IP-driven member benefits. This quarter, digital albums and tailored SVIP packages continue to drive stronger member adoption and user engagement. To conclude, our journey reflects how we have evolved from a gateway for content into a strategic platform that actively shapes the music and audio entertainment landscape. With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

Shirley Hu (CFO, Tencent Music): Thank you, Ross, and greetings, everyone. Let me now turn to our financial results. In Q4 2025, our total revenues grew 16% year-on-year to RMB8.6 billion, driven by strong growth in online music services. Music subscription revenues continued their growth momentum, up by 13% year-on-year, and reached RMB4.6 billion in Q4 2025. Revenues from music services other than music subscriptions were RMB2.5 billion, up by 41% year-on-year. For music subscription revenues, as Ross discussed earlier, we have built a multi-pronged membership system that includes ad-supported membership, standard membership and SVIP. This system has been well-received and successfully led to increased user retention and growth in music subscription revenues. Advertising revenue continued its strong growth trajectory both year-on-year and sequentially. Revenues from social entertainment services and others were RMB1.5 billion, down by 5% year-on-year.

Our gross margin in Q4 2025 was 44.7%, up by 1.1 percentage points year-on-year, which was mainly attributable to strong growth in music subscription and advertising revenues, alongside a lower revenue-sharing ratio in social entertainment services. Moving on to operating expenses, they amounted to RMB1.2 billion, representing 14.4% of our total revenues in Q4 2025, compared with 15.7% in the same period of last year. General and administrative expenses were RMB981 million, up by 6% year-on-year, primarily due to growth in employee-related expenses. Our effective tax rate for Q4 2025 was 17.5%.

For Q4 2025, our net profit increased by 10% to RMB2.3 billion, and net profit attributable to equity holders of the Company increased by 13% to RMB2.2 billion. Non-IFRS net profit increased by 8% to RMB2.6 billion, and non-IFRS net profit attributable to equity holders of the Company increased by 9% to RMB2.5 billion. Our diluted earnings per ADS this quarter was RMB1.41, up by 12% year-on-year, and non-IFRS diluted earnings per ADS was RMB1.60, up by 9% year-on-year. As of December 31, 2025, our combined balance of cash, cash equivalents, term deposits and short-term investments was RMB38.0 billion, as compared to RMB36.1 billion as of September 30, 2025.

Next, I'll briefly discuss our performance for the full year of 2025. Total revenues were RMB32.9 billion, up by 16% year-over-year. Revenues from online music services were RMB26.7 billion, up by 23% year-over-year, driven by strong growth in music subscription revenues supplemented by growth in revenues from offline performances, advertising services and artist-related merchandise. Our music subscription revenues were RMB17.7 billion, up by 16% year-over-year. Revenues from social entertainment services declined by 7% year-over-year. Gross margin in 2025 was 44.2%, up by 1.9 percentage points year-over-year. Total operating expenses for 2025 were RMB4.9 billion, up by 4% year-over-year. In 2025, IFRS net profit increased by 60% to RMB11.4 billion, and net profit attributable to equity holders of the Company increased by 66% to RMB11.1 billion. We have recognized a gain of RMB2.4 billion on deemed disposal of an associate in the first quarter of 2025. Non-IFRS net profit increased by 22% to RMB9.9 billion, and non-IFRS net profit attributable to equity holders of the Company increased by 25% to RMB9.6 billion.

In March 2026, we declared a cash dividend of US$0.12 per ordinary share, or US$0.24 per ADS, for the year ended December 31, 2025. The cash dividend of approximately US$368 million is expected to be paid in the second quarter of 2026. Finally, I'll conclude with some remarks on the outlook. Looking ahead, we will continue our strategy to invest in content and technology. We will keep focusing on IP development and self-produced content, while advancing innovative integrated products with content and platform synergy, to build a richer and more dynamic music and entertainment ecosystem. We remain confident in the healthy growth of our businesses and are committed to delivering returns for our shareholders. This concludes our prepared remarks. Operator, we are ready to open the call for questions.

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Questions & Answers

Analyst (Q1): On the IP-related business — how will IP drive revenue growth for the rest of the year, and how should we think about the outlook?

Liang (Ross) Zhu (CEO): We have built a differentiated platform that combines online services and products, and virtual and non-virtual products — a complete music ecosystem that fully leverages diversified IPs. For this year, we do see some headwinds in membership and ads from competition, but our IP-related services like concerts and performances are experiencing steady growth, driven by high-quality IP supply, deep content collaboration, and diversified monetization across member benefits and SVIP.

Analyst (Q2): On subscription growth excluding new initiatives, how should we think about SVIP/ARPPU and competition?

Liang (Ross) Zhu (CEO): Competition has some impact on traffic and lighter users, but our high-value SVIP users have not been affected. We're stabilizing the SVIP base and adding benefits (merchandise, performances, and with Ximalaya long-form audio). TME has never been upset by competition over the years — the most important thing is to do our own job well, and with Ximalaya we've built a one-stop music-plus-audio platform.

Analyst (Q3): On gross margin and the revenue mix impact from offline business, and shareholder returns?

Shirley Hu (CFO): Q4 gross margin was 44.7% (+1.1pp YoY) on music subscription + advertising growth and lower social-entertainment revenue share, partly offset by lower-margin offline/merch mix; the offline performance business is seasonal (Q2/Q3 heavier). We project gross margin to decline slightly year-over-year in the second half given mix. On shareholder return, we completed US$400 million buyback in Q2, we're preparing another round of buybacks, and declared a US$0.24/ADS dividend (~US$368M) payable in Q2 2026.

Millicent T. (Head of IR): In the interest of time, I would like to wrap up today's call. Thank you again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes today's call. We look forward to speaking with you next quarter. Thank you, and bye.

Liang (Ross) Zhu (CEO): Thank you. Bye.