Tencent Music Entertainment Group NYSE: TME reported second-quarter 2026 revenue of RMB 8.9 billion, up 6% from a year earlier, as growth in music-related services and the consolidation of Ximalaya offset pressure in advertising. Net profit attributable to equity holders rose to RMB 2.5 billion from RMB 2.4 billion in the prior-year period.
Chief Financial Officer Shirley Hu said music-related services revenue increased 11% year over year, supported by membership services and offline performance-related offerings. Membership revenue reached RMB 4.8 billion, up 8% from a year earlier, while Ximalaya contributed about RMB 400 million to total revenue during the quarter.
The company reported diluted earnings per ADS of RMB 1.57. Adjusted EBITDA rose 5% year over year to RMB 3.3 billion, while non-GAAP net profit attributable to equity holders increased 4% to RMB 2.7 billion.
Music IP and offline services drive growth
Executive Chairman Cussion Pang said marketing and consumption services continued to expand through concerts, merchandise and other IP-driven experiences. The company said IP-related consumption services, especially live events and artist merchandise, recorded strong double-digit year-over-year growth during the quarter.
Tencent Music cited concerts and artist-development initiatives involving rapper Zhou Yan, singer Tia Ray and actor and singer Steven Zhang. Pang said the opening show of Zhou Yan’s stadium tour in Xi’an drew more than 30,000 fans, while Tia Ray’s tour concluded with two sold-out arena shows in Hangzhou.
The company also highlighted the expansion of its TIMA concert brand, which moved to Kai Tak Sports Stadium in Hong Kong in its second year. Tencent Music said it increased audience capacity by more than three times from the prior year.
Hu said offline performance-related services generated robust results, including concerts for strategically collaborating artists Silence Wang and Sam Fish. Digital album sales also performed solidly, she said, led by the release of Jeff Chang’s album, Children of the Sun.
Pang said Tencent Music is expanding partnerships beyond music licensing into content co-creation, physical products and offline experiences. The company recently deepened its partnership with Three Music Group and invested in The Black Label to support artist promotion and merchandise development.
Ximalaya broadens audio strategy
Management described the addition of Ximalaya as a key expansion of Tencent Music’s content and platform strategy. The company said the audio platform adds audiobooks, podcasts, online novels, history, children’s content and educational programming, creating more listening occasions and potentially increasing user engagement.
Pang said nine of Ximalaya’s top 10 new online-novel titles this year were produced in-house, which he said demonstrates the platform’s original-content capabilities and offers better economics from owned hits.
Chief Executive Officer Ross Liang said Tencent Music has begun adding premium audio content to its SVIP membership offering. Over time, the company also sees opportunities to improve advertising efficiency through shared technology and infrastructure following the Ximalaya consolidation.
During the question-and-answer session, Liang said Ximalaya brings a user base that includes white-collar and female users in China’s Tier 1 and Tier 2 cities. He also pointed to opportunities to deepen ties with China Literature for audiobook adaptations and with Tencent Video for audio versions of popular video programming.
Advertising faces headwinds; margins expected to ease
Hu said the advertising business, particularly its ad-supported model, is facing headwinds amid a challenging macroeconomic environment and competitive market. The company is seeking to improve advertising exposure, entry rates and effective cost per mille, or eCPM, while introducing more interactive products and expanding distribution through Tencent’s ecosystem.
Gross margin was 44.2% in the second quarter, compared with 44.4% a year earlier. Hu said changes in revenue mix affected the result as offline performance-related services became a larger part of revenue. She added that Ximalaya had a favorable impact on gross margin in the quarter after accounting for intangible-asset amortization recorded in purchase accounting.
Operating expenses totaled RMB 1.3 billion, or 14.5% of revenue, compared with 13.7% a year earlier. Hu said the company reduced channel spending and shifted toward higher-return projects, while relying more heavily on collaborations across the Tencent ecosystem, including WeChat video accounts, WeChat Pay, Tencent Video and Tencent Games.
For the second half, Hu said Tencent Music expects gross margin to decline slightly year over year. She said sales expenses and operating expenses are expected to rise modestly for the full year, net margin is expected to decrease slightly, and EBITDA is expected to edge higher.
SVIP, AI and shareholder returns remain priorities
Liang said the company is working to protect and expand its higher-value SVIP user base through premium music, audio content, digital albums, merchandise, photo cards, NFC cards and gaming-related member benefits. He said casual and light users have been more affected by competitive conditions than high-value users.
Tencent Music also continued to introduce AI-based discovery tools, including upgraded AI agents on QQ Music and Kugou that can generate personalized playlists. Liang said the integration with Weixin’s Xiaowei AI agent remains in testing, but users are already using it to create playlists, share songs and stream music through voice or text commands.
Management said AI is primarily intended to improve engagement, activity and efficiency, though Liang said the company has also generated commercial returns from AI music-generation functions in its apps.
As of June 30, Tencent Music had RMB 44.2 billion in combined cash equivalents, term deposits and short-term investments, up from RMB 41 billion at March 31. Under its repurchase program, the company bought back 43.5 million ADSs for $400 million during the second quarter. Pang said Tencent Music remains on track to complete its existing $1 billion shareholder-return program and is preparing for another round of repurchases.
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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