Tencent Music Shares Tumble 6% After Q2 Earnings Miss

SHENZHEN – Tencent Music Entertainment Group reported second quarter earnings that did not meet analyst expectations, leading to a 6.4% drop in share prices during premarket trading on Tuesday.

The Chinese music streaming leader reported adjusted earnings per American Depositary Share (ADS) of RMB1.07 ($0.15), falling short of the analyst consensus of RMB1.10. However, revenue slightly exceeded estimates at RMB7.16 billion ($985 million), compared to expectations of RMB7.15 billion.

Despite a total revenue decline of 1.7% year-over-year, revenue from online music services soared by 27.7% to RMB5.42 billion ($746 million). This growth was primarily fueled by a 29.4% increase in music subscription revenue, which reached RMB3.74 billion ($515 million). The company also saw a 17.7% increase in the number of paying users for its online music services, bringing the total to 117 million.

On the other hand, social entertainment services and other revenues plummeted by 42.8% to RMB1.74 billion ($239 million). The company attributed this decline to adjustments in certain live-streaming features and the implementation of stricter compliance measures from the previous year.

Cussion Pang, Executive Chairman of Tencent Music, commented on the results, saying, "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 ground within China’s streaming landscape."

Despite the earnings miss, Tencent Music’s gross margin improved significantly to 42.0% from 34.3% in the same quarter last year, largely due to robust growth in higher-margin music subscriptions and advertising services.

The company concluded the quarter with RMB35.03 billion ($4.82 billion) in cash and short-term investments.