Tencent Music Entertainment Group - ADR

Strong 2025 results; momentum in online music + advertising - Q4 2025: Total revenues +15% YoY to RMB 8.6bn. - Music subscription: +13% YoY to RMB 4.6bn. - Non-subscription music services: +41% YoY to RMB 2.5bn. - Gross margin: 44.7% in Q4 (+1.1pp YoY), supported by subscription + ad growth and a lower revenue-sharing ratio in social entertainment. - Full-year 2025: Total revenues RMB 32.9bn (+16% YoY); online music services RMB 26.7bn (+23% YoY). - Music subscription full-year: RMB 17.7bn (+16% YoY); social entertainment +7% YoY. - Profit: Q4 net profit +10% YoY to RMB 2.3bn; non-IFRS net profit +8% YoY to RMB 2.6bn. Full-year non-IFRS net profit RMB 9.9bn (+22% YoY).

Business strategy: dual engine (content + platform) with more emphasis on monetization, not just subscribers - Leadership emphasized differentiated all-in-one music platform and a growing content flywheel (classic catalog, self-produced content, and OST/coproduction capabilities). - 2025–2026 change in disclosures (surprising/important): They will discontinue quarterly disclosure of certain operating metrics and instead report annually total paying users by year-end—signaling a shift toward profit/revenue KPI focus over “subscriber metrics” cadence. - SVIP scale milestone: Over 20 million SVIP users (ended 2025 above 20m); ARPPU slightly up; new AD-supported subscription plan gaining initial traction (used to broaden addressable user class).

Non-subscription growth levered via live events, merchandise, and artist IP - Management highlighted expansion of off-line experiences and artist/merch monetization (live concerts + collectible merchandise) as a key driver for non-subscription revenue growth. - Examples cited: - G-Dragon World Tour: 20 concerts across 8 cities, 260k+ fans, with Taipei Dome shows drawing 75k+. - Physical/collectible formats: KIT album with Ed Sheeran (hybrid physical-digital), and expanded collectible merchandise for other artists. - CFO noted this continued investment may cause gross margin volatility due to revenue mix changes as offline/merch scales.