Tencent Music Entertainment Group Q4 FY2025 earnings call

In 2025, remained disciplined in executing dual-engine content and platform strategy. Differentiated all-in-one music service platform fueled subscription growth and non-subscription momentum. Competitive edge stems from industry-leading music copyright portfolio. Renewed contracts with labels, deepened alliances, expanded music services. Proprietary content streaming share growing. Thrived Tencent Musician platform for indie artists. Hosted flagship events like G-Dragon's tour. Built diverse strategic artist lineup. Introduced innovative merchandise formats. Focus moved beyond paid subscribers and ARPPU to revenue and profits. Improved accessibility and inclusive design with features like hearing protection mode in QQ Music and upgraded large front mode in WeSing.

In 2025, total revenues were 32.9 billion, up 16% year-over-year. Online music service revenues were 26.7 billion, up 23% year-over-year. Music subscription revenues were 17.7 billion, up 16% year-over-year. Social and terminal service revenues climbed 7% year-over-year. Q4 2025 total revenues grew 15% year-on-year to 8.6 billion. Music subscription revenues in Q4 grew 13% year-on-year to 4.6 billion. Advertising revenue continued strong growth. Offline performances and artist-related merchandise sales made progress. Gross margin in Q4 2025 was 44.7%, up 1.1 percentage points year-on-year.

In 2026, subscription revenue may face short-term pressure due to intensive competition but believes three-tier membership and non-subscription services will drive historical, holistic, and sustainable growth. Continue to embrace AI to improve user experience and content creation/promotion efficiencies. Keep focusing on IP development and self-produced content while advancing innovative integrated products with content and platform synergy.

AI is profoundly changing the music industry, bringing challenges like increase in AI songs on charts and potential copyright risks. Intense competition in the market also poses risks.

Q: In light of the AI wave and growing industry competition, what is the company's strategic growth outlook for 2026?

A: Internally, TME has solid results in 2025 with growth in subscription and non-subscription offerings. SVIP scaled and advertising membership piloted. Externally, remains focused on long-term value creation. AI embraced to improve user experience and content creation.

Q: How is Tencent Music incorporating AI into products and ecosystem and impact on music, songs, platforms, and user behavior?

A: Embracing AI in music creation, providing one-stop AI music production tools. AI agent developed. AI-generated content has both challenges and opportunities. Also, will continue to invest in IP creation and offline music experience which are hard to be replaced by AI.

Q: How to look at the trend in terms of net profit and profit growth in 2026?

A: 2026 GP will stay flat with 2025, a bit lower. Growth of subscription and advertising business will impact GP margin. Operating profit will be affected by competitive landscape and AI changes, but will focus on core values and ROI.

Q: Impact of AI-generated music on online music industry, including demand side and royalty pool?

A: AI-generated content mainly for re-singing, no big change in consumption of original songs. UGC in music will be distributed among familiar users, but no material change in royalty and revenue sharing.

Q: Update on Himalaya acquisition deal and share repurchase program?

A: Still actively communicating with the market regarding Himalaya deal. Will disclose updates if any. Regarding share repurchase, will carry out in accordance with compliance and supervision, responding to market needs while meeting regulatory requirements