This Spotify Rival From China Just Saw Its MAUs Dip in Q2, Stock Slides

Tencent Music Entertainment Group TME reported second-quarter revenue growth of 5.5% year-over-year to $1.01 billion, missing the consensus of $1.03 billion. Adjusted EPADS of $0.13 missed the consensus of $0.14.

Key Metrics: The Q2 Monthly active users (MAUs) for online music declined by 4.7% Y/Y to 594 million. Mobile MAUs for social entertainment decreased by 18.1% Y/Y to 136 million.

Monthly ARPPU for online music grew by 14.1% Y/Y to RMB9.7, Monthly ARPPU for social entertainment declined 20.5% Y/Y to RMB135.0, and Online music paying users increased by 20.2% Y/Y to 99.4 million. 

Online music service revenues grew by 47.6% Y/Y to $586 million, while the revenues from music subscriptions were $399 million, an increase of 37.2% Y/Y.

Revenues from social entertainment services and others increased by 24.6% Y/Y to $419 million.

The gross margin increased by 440 bps to 34.3%, primarily due to the strong growth of revenues from music subscriptions and advertising services and the ramp-up production of original content.

The operating profit increased by 47.3% Y/Y to $212 million, driven by effective cost controls.

Net cash provided by operating activities was $285 million. The combined balance of the company's cash, cash equivalents, term deposits, and short-term investments amounted to $4.21 billion.

Cussion Pang, Executive Chairman of TME said, "Starting from the latter part of the second quarter of 2023, we have proactively implemented several service enhancement and risk control measures to ensure a more music-centric live streaming atmosphere."

Price Action: TME shares traded lower by 7.80% at $5.63 premarket on the last check Tuesday.