Tencent Music's Q3 Revenue Tops $1 Billion, But Monthly Active Users Fall 3%, Stock Reacts

Tencent Music Entertainment Group TME reported a fiscal third-quarter 2024 revenue growth of 6.8% year-over-year to $1.00 billion (7.02 billion Chinese yuan), beating the analyst consensus estimate of $980.86 million. 

Growth in revenues from online music services was partially offset by a decline in revenues from social entertainment services and others.

China’s online music and audio entertainment platform’s adjusted EPADS of $0.16 (1.16 Chinese yuan) missed the analyst consensus estimate of $0.17. The stock fell after the earnings report.

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Key Metrics: Monthly active users (MAUs) for online music declined by 3.0% year over year to 576 million, and mobile MAUs for social entertainment decreased by 30.2% year over year to 90 million.

The monthly average revenue per user (ARPPU) for online music grew by 4.9% year over year to 10.8 Chinese yuan, Monthly ARPPU for social entertainment declined by 24.8% year over year to 64.8 Chinese yuan, and Online music paying users increased by 15.5% year over year to 119.0 million. 

Online music service revenues grew by 20.4% year over year to $781 million, while revenues from music subscriptions were $547 million, an increase of 20.3% year over year.

Revenues from social entertainment services and others decreased by 23.9% Y/Y to $219 million.

The gross margin increased by 690 bps to 42.6%, 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 50.5% Y/Y to $306 million.

Operating cash flow was $309 million for the quarter. As of September end, the combined balance of the company’s cash, cash equivalents, term deposits, and short-term investments amounted to $5.14 billion.

Tencent Music Entertainment’s Executive Chairman, Mr. Cussion Pang, noted that the company’s focus on quality growth is evident in its strong quarterly results, driven by increasing music subscribers and diverse services. He emphasized the synergy between the platform and its content ecosystem as key to sustainable, long-term growth.

The CEO, Mr. Ross Liang, pointed out that their strategy of enhancing user privileges and premium memberships has successfully boosted loyalty, supporting the expansion of the paying user base.

Tencent Music Entertainment Group stock gained over 32% year-to-date.

Price Action: TME stock was down 9.74% at $10.43 at the last check on Tuesday.

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