Tencent Music Q2: Revenue Misses Estimates, Social Entertainment Takes a Hit, Adds 10M Subscribers in First Half

Tencent Music Entertainment Group TME reported a fiscal second-quarter 2024 revenue decline of 1.7% year-over-year to $985.00 million (7.16 billion Chinese yuan), missing the analyst consensus estimate of $996.68 million. 

The decline reflected a fall in revenues from social entertainment services, partially mitigated by strong year-over-year growth in revenues from online music services.

China’s online music and audio entertainment platform’s adjusted EPADS of $0.16 (1.19 Chinese yuan) was in line with the analyst consensus estimate. The stock price slid after the print.

Key Metrics: Monthly active users (MAUs) for online music declined by 3.9% year over year to 571 million, and mobile MAUs for social entertainment decreased by 31.6% year over year to 93 million.

The monthly average revenue per user (ARPPU) for online music grew by 10.3% year over year to 10.7 Chinese yuan, Monthly ARPPU for social entertainment declined by 45.8% year over year to 73.2 Chinese yuan, and Online music paying users increased by 17.7% year over year to 117.0 million. 

Online music service revenues grew by 27.7% year over year to $746 million, while revenues from music subscriptions were $515 million, an increase of 29.4% year over year.

Revenues from social entertainment services and others decreased by 42.8% Y/Y to $239 million.

The gross margin increased by 770 bps to 42.0%, 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 42.8% Y/Y to $302 million.

Operating cash flow was $405 million for the quarter. The combined balance of the company’s cash, cash equivalents, term deposits, and short-term investments amounted to $4.82 billion as of June-end.

Cussion Pang, Executive Chairman of TME, commented, “We are pleased to report another quarter of robust results, driven by the strong performance of our online music services. With over 10 million net subscriber additions in the first half of 2024 and ARPPU expansion, we continue to break new grounds within China’s streaming landscape.”

Tencent Music Entertainment stock gained 114% in the last 12 months.

Price Action: TME shares are trading lower by 7.16% at $12.19 premarket at the last check Tuesday.

Photo by Antonio Gravante via Shutterstock