Tencent Music Entertainment Group American Depositary Shares, each representing two Class A Ordinary Shares 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- In Q2 2026, the company delivered 6% year-on-year revenue growth to RMB 8.9 billion, driven primarily by strong growth in music-related services and the consolidation of Himalaya contributing approximately RMB 0.4 billion.
- Revenue from membership services grew 8% year-on-year to RMB 4.8 billion, supported by diversified VIP privileges and collaborations.
- Marketing and consumption services, including live performances and digital album sales, showed robust results with strong double-digit year-on-year growth in IP-related consumption services.
- Gross margin was 44.2% in Q2 2026, slightly down from 44.4% a year ago, impacted by revenue mix changes and growth in offline performance-related services.
- Operating expenses increased to RMB 1.3 billion, or 14.5% of total revenues, due to adjusted sales strategies and consolidation effects from Himalaya.
- Adjusted EBITDA rose 5% year-on-year to RMB 3.3 billion, and net profit attributable to equity holders increased 4% to RMB 2.7 billion.
- The company repurchased 43.5 million shares for US$400 million in Q2 2026 as part of its ongoing shareholder return program.
- User engagement improved with average daily time spent increasing, supported by product innovations such as enhanced content discovery, 3D audio, and upgraded AI agents acting as personal DJs.
- The integration of Himalaya expanded the content offering, creating a one-stop music plus audio platform and broadening user reach and engagement.
- Strategic partnerships with artists and labels, including SM Entertainment and Black Label, supported IP development, artist management, and live event success.
- The company emphasized copyright protection efforts, including proactive screening, takedown actions, and industry collaboration, especially in the evolving AI era.
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Transcript
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We announced our quarterly financial results for Tencent Music before the U.S. market opened. The earnings release is now available on our website and via investor services. During today's call, you will hear from Mr. Cussion Pang, our Executive Chairman, and Mr. Ross Yang, our CEO, who will share an overview of the company's strategies and business updates. Then Mr. Shen will ask both to discuss our financial results before we open the floor for questions. Before we continue, I refer you to the safe harbor statement in our earnings release, which applies to this call as well as the following statements. Please note that we discuss non-IFRS measures today, which are not thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC. All participants are mute at this time.
After management's remarks, there will be a Q&A session, and please be advised that today's call is being recorded. With that, I am pleased to turn the call over to Cussion, Executive Chairman of Tencent Music. Cussion, please. Thank you, Madison.
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.
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