Tencent Music Entertainment Group NYSE: TME reported steady first-quarter 2026 results as management highlighted growth in music-related services, rising contributions from offline performances and continued pressure from competition and AI-related copyright issues.
On the company’s earnings call, Chief Financial Officer Shirley Hu said total revenue rose 7% year over year in the quarter. Revenue from music-related services increased 12%, driven by membership services, offline performance-related services and advertising. Membership services revenue was RMB 4.6 billion, up 7% from a year earlier.
Executive Chairman Kar Shun Pang said Tencent Music’s growth is increasingly being supported by “diversified monetization across the music value chain,” adding that the offline concert-related business delivered another quarter of triple-digit year-over-year growth.
Management Points to AI Copyright Challenges
Pang said the company is operating in an “increasingly competitive landscape” and identified unauthorized AI-generated content as a key challenge for the industry. He said such content creates headwinds for music subscription growth, undermines creators’ rights and dilutes the long-term value of the music ecosystem.
“We are working closely with creators, rights holders, and regulators to lead and champion robust copyright protection efforts,” Pang said.
During the Q&A session, Hu said the company had established a dedicated rights-protection mechanism and would act against “song washing and other infringing behaviors.” Management said it supports technological innovation but does not want AI to become an excuse for infringement.
At the same time, Pang said AI is becoming an important tool within Tencent Music’s own business. He cited the company’s one-stop AI music production tool, Venus, which supports creators through songwriting, composition, arrangement, vocal performance and mixing. Pang said AI can improve efficiency while complementing rather than replacing human creativity.
Membership Strategy Shifts Toward IP-Based Offerings
Chief Executive Officer Ross Liang said Tencent Music is transitioning toward a broader membership-based model that goes beyond content subscriptions. The company is focusing on a “content and platform dual engine” strategy to improve user engagement and lifetime value.
Liang said the company is using a tiered membership approach to address different user segments. Light users are being served through free and ad-supported models, while more engaged users are targeted with basic music services, fan clubs and products such as Bubble.
The company did not disclose retention rates by subscription tier. Liang said retention was generally stable and said the company’s medium- and high-value users remained intact. He added that SVIP membership continued to grow steadily.
Management said some quarter-over-quarter weakness in membership services was tied to competition in the music streaming business, particularly among free and ad-supported users. Liang said Kugou users are more price-sensitive and promotion-sensitive, while QQ Music’s operating data remained “steady and healthy.”
Offline Performances and Artist IP Drive Growth
Pang and Liang both emphasized Tencent Music’s efforts to expand beyond traditional streaming through concerts, merchandise, digital albums and fan memberships.
Pang said the company renewed licensing arrangements with labels including JVR Music, Linfair Records and Mok-A-Bye Baby Music Limited, securing access to catalogs from artists including Jay Chou, Karen Mok, Harlem Yu and Angela Zhang. The company also deepened its strategic partnership with TF Entertainment.
Pang cited Tencent Music’s collaboration with Jay Chou on the digital album “Children of the Sun,” which bundled the album with SVIP memberships and physical collectibles. He said the release was supported by a nationwide offline campaign across 45 cities, topped major charts, surpassed CNY 1 billion in sales and drove SVIP conversions.
The company also highlighted recent collaborations and releases involving artists including Kun, Roy Wang, Silence Wang, Will Pan, Tia, Jane Zhang and others. Tencent Music said it staged flagship concerts involving K-pop groups BABYMONSTER and NCT WISH, and supported tours and performances in markets including Taiwan, Hong Kong, Singapore, Asia and North America.
Liang said the company launched its first fan club, Romance Universe, with Silence Wang, offering benefits such as priority ticket access, unique content and artist-specific perks. He also pointed to merchandise distribution for artists and groups including TOP, Song Yuqi and Hu Xia.
Financial Results Show Margin Expansion
Hu said Tencent Music’s gross margin was 44.9% in the first quarter, up 0.8 percentage points from the prior-year period. She attributed the improvement to growth in membership and advertising revenue, lower channel fees and improved cost efficiency for IP-related services.
Revenue from social entertainment services and others was RMB 1.4 billion, down 11% year over year.
Operating expenses were RMB 1.2 billion. Selling and marketing expenses rose 36% year over year to RMB 271 million, which Hu said reflected increased channel spending in response to competition and efforts to reduce user churn. General and administrative expenses were RMB 940 million and remained relatively stable from a year earlier.
Net profit attributable to equity holders was RMB 2.1 billion, compared with RMB 4.3 billion in the same period of 2025. Hu said the prior-year period included a RMB 2.4 billion gain from the disposal of an associate. Diluted earnings per ADS were RMB 1.34.
The company reported adjusted EBITDA of RMB 2.8 billion, up 10% year over year, and non-GAAP net profit attributable to equity holders of RMB 2.3 billion, up 7%.
As of March 31, Tencent Music had RMB 41 billion in cash equivalents, term deposits and short-term investments, compared with RMB 38 billion at the end of 2025. The company declared a dividend of $0.012 per ordinary share, or $0.24 per ADS, for 2025, with a $317 million cash payment made in April. Hu also said Tencent Music plans to complete its two-year stock repurchase program announced in March 2025 on time.
WeChat Channels and Ximalaya Discussed in Q&A
Management said Tencent Music is deepening integration with the Tencent ecosystem, including WeChat Channels. Pang said users who discover music through short-form video can now jump directly to QQ Music, creating a path from discovery to legitimate listening, collection and higher-quality consumption.
In response to an analyst question about Ximalaya, Liang said Tencent Music had received notice of approval from China’s State Administration for Market Regulation. He said Tencent Music and Tencent Group would follow SAMR’s requirements and commitments to proceed legally.
Looking ahead, management did not provide a detailed revenue forecast. Pang said Tencent Music expects some short-term volatility in growth from membership and advertising because of competition, but remains optimistic about comprehensive IP-based monetization over the long term. Hu said second-quarter gross margin is expected to be on par with last year, while IP-related business growth may create structural pressure on margins.
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.
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