Tencent Music Entertainment Group (NYSE:TME) used its fourth-quarter and full-year 2025 earnings call to highlight accelerating growth from what management described as a “dual-engine” strategy built on content and platform development, alongside sustained margin expansion. Executives pointed to strong momentum in music subscriptions and a fast-growing set of non-subscription offerings, including advertising, offline performances, and artist-related merchandise.
Content strategy centers on copyrights, proprietary releases, and younger audiences
Executive Chairman Cussion Pang said the company remained “disciplined” in executing its dual-engine strategy in 2025, emphasizing TME’s “industry-leading music copyright portfolio” as a core competitive advantage. Pang said the company renewed agreements with Warner Music Group and Believe Music, and is exploring “new avenues for physical albums, merchandise, and live performances.”
On proprietary content, Pang said streaming share of TME’s self-produced releases continued to grow. He cited the Mid-Autumn themed song “Year After Year” performed by Xiao Zhan, which he said charted in 17 countries and regions and generated over 100 million social media views in a single day. He also noted TME produced a 14-track original soundtrack suite for Tencent Video’s drama “Shine On Me,” which management said topped multiple charts during the show’s run.
To reach younger listeners, Pang pointed to growth in K-pop streaming and said TME renewed a partnership with P NATION that provides a 30-day “headstart” window on releases from artists such as Psy, Crush, Hwasa, Baby Don’t Cry, and TNX. Pang also highlighted the Tencent Musician platform as an avenue for indie artists, citing a partnership with indie band Fine and engagement around its track “Breathing Decision.”
Offline events and merchandise expand the revenue mix
Pang said TME is expanding music-related value-added services beyond subscriptions, including live experiences and fan-based consumption. He highlighted production work on G-Dragon’s Kwon Ji-yong World Tour, describing a 20-concert run across eight Asia-Pacific cities that attracted over 260,000 fans, including two shows at the Taipei Dome in the fourth quarter with more than 75,000 attendees.
He also said strategic artist investments across promotion, live performance, management, and merchandise contributed to non-subscription revenue growth in 2025. Pang listed artists in the portfolio including Hailai Ahmu, Wilber Pan, Fiona Sit, Silence Wang, Tia Ray, Jane Zhang, and Gai.
On merchandise innovation, Pang cited a kit album partnership for Ed Sheeran’s release “Play,” calling it the company’s first partnership with a top-tier Western artist using a hybrid physical-digital format. He also referenced collectible enhancements for Esther Yu’s album “Spicy Honey,” tour-themed collectibles, and commemorative releases tied to Lay Zhang and Lu Han. Pang said TME “more than doubled” revenue from IP-related merchandise and fan-based consumption as it exited 2025.
Product and AI initiatives focus on membership tiers, social features, and AI tools
CEO Ross Liang said the company built a “multi-pronged membership system” designed to improve conversion, engagement, and share of wallet. He said TME ended 2025 with more than 20 million SVIP users and that ARPPU was “trending steadily upward.” Liang also said a new ad-supported subscription plan is gaining initial traction, which he framed as a way to broaden access and attract new audiences over time.
Liang said TME is deepening its presence across devices beyond mobile, including PC, in-car, smart speaker, and wearable ecosystems, and described a multi-app strategy in which QQ Music and Kugou target highly engaged users while lighter versions such as Bodian Music and Kugou Concept serve casual listeners.
Social features were also emphasized. Liang said QQ Music introduced Weverse DM in the fourth quarter, onboarding 170 artists from HYBE and other labels. He added Bubble upgraded functionality with “intelligent song recognition,” and that additional features—including live streaming for domestic artists and a music report campaign featuring handwritten letters and AI-generated voice messages—supported engagement and sharing.
On AI, Liang said more than 10 million users and over 150,000 professional creators use TME’s one-stop AI music production platform. He described features such as track refinement and AI-generated vocal demos, as well as AI tools that capture chorus highlights and generate lyric-based videos. Liang also said the company upgraded its self-developed multimodal large model, contributing to a record-high recommendation-driven stream share, and discussed collaboration with Weixin Video Accounts to co-create trends and add background-music links in comments. He said Yuanbao has been embedded into QQ Music and that an AI agent can execute multi-step tasks via natural language, including accessing digital album and merchandise purchases.
Management to stop quarterly disclosure of certain operating metrics
Pang said that as advertising and IP-related offerings scale and as multi-tiered memberships expand, “the business impact of each paid membership varies.” He said management’s focus has shifted from paid subscriber counts and ARPU toward revenue and profits as the primary performance indicators. As a result, starting next quarter, the company will discontinue disclosing certain operating metrics on a quarterly basis, and will instead report annually the total number of paying users across music services as of year-end.
Financial results: revenue up 16% in Q4; margin expansion continues
CFO Shirley Hu said TME closed 2025 with “outstanding” top-line and bottom-line performance, citing growth across music subscriptions, advertising, offline performance, and artist-related merchandise, alongside what she called an ROI-focused approach to promotional expenses.
For the fourth quarter of 2025, Hu reported:
- Total revenue: CNY 8.6 billion, up 16% year-over-year
- Music subscription revenue: CNY 4.6 billion, up 13% year-over-year
- Music services revenue excluding subscriptions: CNY 2.5 billion, up 41% year-over-year
- Social entertainment services and others: CNY 1.5 billion, down 5% year-over-year
- Gross margin: 44.7%, up 1.1 percentage points year-over-year
- Net profit: RMB 2.3 billion, up 10% year-over-year
- Net profit attributable to equity holders: RMB 2.2 billion, up 13% year-over-year
- Non-GAAP net profit: CNY 2.6 billion, up 8% year-over-year
- Diluted EPS per ADS: CNY 1.41, up 12% year-over-year (non-GAAP diluted EPS per ADS was CNY 1.6, up 9%)
Hu said advertising revenue grew both year-over-year and sequentially, driven by growth in the ad-supported model, increased advertisers, higher entrance rates, higher ECPM, and contributions from the Double 11 shopping festival. She also cited sponsorship advertising growth tied to offline performances and music festivals.
Operating expenses in Q4 totaled CNY 1.2 billion, or 14.4% of revenue, compared with 15.7% in the prior-year period. Selling and marketing expense rose 7% year-over-year to RMB 266 million, driven by higher channel spending and content promotion, while general and administrative expense rose 6% to RMB 981 million due to higher employee-related costs. Hu also noted an effective tax rate of 70.5% in Q4.
As of Dec. 31, 2025, TME reported a combined balance of cash, equivalents, term deposits, and short-term investments of CNY 38 billion, up from CNY 36.1 billion at Sept. 30, 2025, with Hu noting the figure was impacted by exchange-rate changes.
For the full year 2025, Hu said total revenue was CNY 32.9 billion, up 16% year-over-year, while music subscription revenue was CNY 17.7 billion, up 16%. She reported gross margin of 44.2% for 2025, up 1.9 percentage points year-over-year, and total operating expenses of CNY 4.9 billion, up 4%.
Hu said the company recognized a gain of CNY 2.4 billion on the disposal of an associate in the first quarter of 2025. She reported net profit attributable to equity holders increased 66% to CNY 11.1 billion, and non-GAAP net profit increased 22% to CNY 9.9 billion.
The company also declared a cash dividend in March 2026 of $0.20 per ordinary share, or $0.24 per ADS, for the year ended Dec. 31, 2025, totaling about $368 million and expected to be paid in the second quarter of 2026.
During Q&A, management said 2026 subscription revenue could face “some short-term pressure” due to intense competition, while reiterating plans to invest in content and technology and to use AI to improve user experiences and content creation efficiency. The company also said it is still communicating with regulators regarding the proposed Ximalaya transaction and that it will disclose updates if there are changes. Management added it plans to continue executing a previously approved two-year share repurchase program, subject to regulatory requirements and market conditions.
About Tencent Music Entertainment Group (NYSE:TME)
Tencent Music Entertainment Group (NYSE: TME) is a China-based digital music and audio entertainment platform that operates a portfolio of leading music streaming and social entertainment services. Its core consumer-facing products include streaming apps, online karaoke (KTV) services and live music and entertainment broadcasts. The company monetizes its content through a mix of subscriptions, digital music sales, in-app purchases, virtual gifting, advertising and licensing arrangements with rights holders.
The company traces its roots to the consolidation of Tencent’s music assets and was established in the mid-2010s to unify several prominent music properties under a single operating entity.
