Tencent Music Entertainment Group American Depositary Shares, each representing two Class A Ordinary Shares 2026 Q2 Earnings Call

Hello, everyone, and thank you for joining our call today. In the second quarter, we delivered resilient performance while navigating a complex and evolving market. Our second growth engine continued to strengthen. Revenue from marketing and consumption service achieved another quarter of solid growth as we further expanded the value of music IP through live concerts, merchandise, and other IP-driven experiences. The addition of Ximalaya marks another important step in our content and platform strategy. By bringing music and audio together, we are enriching our content offering, reaching users across more listening occasions, and giving them more ways to discover, enjoy, and engage with great content. Our strategy is clear. We are strengthening our content ecosystem by deepening strategic partnerships, developing more proprietary IP, and extending premium content across a wider range of use experiences.

First, premium content remains at the heart of this strategy, and the recent momentum we are seeing with classic catalogs is a perfect example. Hits variety shows and concert tools have amplified the reach of this work, making loyal fans more engaged while drawing in new generation of listeners. This has led to continuous growth in their streaming share. Second, we continue to expand our partnerships beyond traditional content licensing. Recently, we deepened our partnerships with Three Music Group. In addition to securing digital-first releases for its top artists, we expanded our collaboration into new areas, including content co-creation, physical offerings, and offline experiences. At the same time, we partnered with Huace Film & TV, Wuyifilm Entertainment, and Zhejiang Satellite TV to bring original soundtracks and popular music variety shows to our platform, creating a more immersive connection between music and visual entertainment.

These deeper partnerships allow us to work more closely with creators and rights holders across the whole music value chain, enabling us to create more value from premium IP. Third, another key focus is developing more high-quality proprietary content, which is becoming an increasingly important differentiator for TME and giving users more reasons to engage with our platform. Examples include Chosen's Blaze into Bloom, 热烈盛开, the theme song for the 2026 Jiangsu Football City League, Liu Yuning's Borrow a Little Light from Ordinary Days, 平凡的日子借一点光, Kugou Music's new brand anthem, and the theme song and insert song for the hit animated theme, All Wishes Come True!, 八仙, all of which recorded strong streaming performance since their release. Fourth, Ximalaya further strengthens our content advantage with its premium audiobooks and podcasts.

By adding popular categories like online novels, history, kids content, and education, we can reach users across many other more listening occasions, ultimately enhancing user time spent and engagement within our ecosystem. What really stands out is Ximalaya's ability to create its own hits. Its original productions have consistently driven strong engagement and paid conversion. In fact, nine of its top 10 new online novel titles this year were produced in-house, underscoring both the strength and scalability of its original content capabilities. Just as importantly, owning these hits also means better economics. With the strength of our content and platform ecosystem, deep user insights, expansive services, and a strong commitment to upholding copyright protection, a growing number of artists are turning to us as we expand talent development and artist management. This is a natural extension of our ecosystem that creates value for artists we are uniquely positioned to deliver.

This is exciting as it empowers us to be more entrepreneurial and innovative in bringing more premium content and IP-driven immersive music experiences to music lovers. First, take rapper Zhou Yan, for instance. As his strategic partner, we have supported him across content promotion, IP development, and concert planning, helping him expand into new markets and formats and grow from arena shows to stadium concerts. Following the success of his Evolution Tour in Asia, we launched the Wu Ji, the first Chinese language rap stadium tour in China. More than 30,000 fans attended his opening show in Xi'an. Tia Ray is another good example. Her Once Upon a Moon tour wrapped up with two consecutive sold-out arena shows in Hangzhou and is now reaching international markets, showcasing her rising profile and growing fan base. We are also helping artists expand into new opportunities.

For renowned actor and singer Steven Zhang, we produced his debut arena tour, New Journey, and his opening show in Shenzhen sold out quickly during pre-sales. Second, recently, we invested in The Black Label to deepen our collaboration on a broader range of IP-related initiatives, including artist promotion and merchandise development, helping leading artists to build deeper connections with their audience in China. This strategic partnership reflects our commitment to exploring cross-border opportunities and deepening the fan-based economy. By integrating content creation, music streaming, artist development, live experiences, merchandise, and fans engagement, we are able to create more value from premium IP, truly bringing the IP to life. We are already seeing encouraging results. IP-related consumption services, particularly live events and artist merchandise, continue to deliver strong double-digit year-over-year growth during the quarter. First, in live entertainment, we hosted three fan meetings in Macau for SM Entertainment's trainee group, SMTR25.

The event attracted tens of thousands of fans and generated strong merchandise sales. TIMA, our proprietary flagship concert IP for International Music Awards, is becoming a larger and more influential brand in just its second year. Building on last year's success, we scaled up the venue to Kai Tak Sports Stadium in Hong Kong, including audience capacity by more than 3-folds, capturing music lovers' growing enthusiasm. Second, artist merchandise also continued to gain momentum. By bringing together our capabilities in IP development, product design, merchandising, and distribution, we are creating more meaningful connections between artists and their fans. During the quarter, we produced Chosen's physical albums in both CD and vinyl formats, complemented by a range of collectibles merchandise that generated strong fan demand. Physical album releases from Kwan Cai Xukun, Chen Chusheng, and Puyi Yexing also delivered impressive results.

Protecting copyright is fundamental to preserving the long-term value of premium IP. During the quarter, we continued to strengthen our copyright protection efforts through proactive screening and takedown, legal action, and closer collaboration across the industry. As AI continues to evolve, we are stepping up our engagement with regulators, music labels, artists, and other industry partners to strengthen copyright protection in the new era. By working together across the industry, we believe we can foster a healthier environment for creators, reinforce the long-term value of premium IP, and support the sustainable development of the music industry. We remain committed to providing a safe and enjoyable music experience for users of all ages. During the second quarter, with comprehensive upgrades to Youth Mode across our core products, we created a dedicated library of age-appropriate music, helping younger users discover and enjoy music in a safer and more trusted environment.

To conclude, while challenges remain, we believe we are still in the early innings of unlocking the full potential of premium IP. We are excited about the opportunities ahead and remain confident in our ability to deliver sustainable long-term growth. With that, I will turn the call over to Ross.

Thank you, Kashan. Hello, everyone. While the competitive landscape continues to evolve, our commitment has not changed, delivering the best music and audio experiences for all users. Every user listens differently. That's why we continue to innovate our products, broaden our user reach, and enrich our membership offering. In the second quarter, our focus on user experience translated into stronger engagement, with average daily time spend continuing to improve, supporting standing growth in membership revenue. Product innovation remains at the heart of everything we do to serve our users. This quarter, we created a more seamless discovery-to-playback journey through improvements in content discovery and audio quality. Enhanced content discovery features such as swipe tabs and video feeds help users explore more relevant content in a more engaging way. Newly introduced 3D NICA Sunday in audio also allowed free premium users to experience premium sound quality from their very first listen.

Thought of 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 intents. Acting as personal DJs, these AI agents can now instantly create personalized playlists tailored to users' listening needs in the moment. Together, these improvements helped users discover more content, boosted their time spent on our platform, and increased the share of recommendation-driven streams. While delivering great services is the foundation, reaching more users is equally important. That's why 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. We are creating a more seamless journey from music discovery to full track listing on TME.

Collaborations with Weixin Pay also helped our lightweight products such as Bodian Music and the Kugou Concept attract users looking for simple music experience and deepen their engagement. Furthermore, we recently integrated with Weixin's AI agent, Xiaowei. We are pleased that by tapping into Weixin's massive user base, more users can now discover songs, generate playlists, stream music with easy commands, and instantly share favorite tracks with friends. Together, these initiatives are expanding our user reach, improving conversion and 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 XPeng, and introduced the LLM pod search to deliver a smarter in-car experience.