Tencent Music Entertainment Group (TME) Q2 FY26 earnings call: guidance and Q&A

How will IP-related business drive revenue growth for the rest of the year, and what is the financial outlook and impact of Ximalaya consolidation in H2 FY26?

IP-related services, especially concerts and performances, are experiencing steady growth due to strong IP supply, content collaboration, and diversified monetization channels. Ximalaya's integration creates a one-stop music-plus-audio platform, amplifying the user base and time spent, unlocking future growth potential.

“For this year, competition, we do see some typewinds from the competitive area, be it membership and as business. But our IP-related services to employing like concerts and performance are experienced in steady drop, mainly because of the following reasons.”

asked by Unknown Analyst · answered by Liang Zhu (Executives)

What is the growth trend for SVIP/ARPU in H2 FY26, excluding Ximalaya, and what is the latest status of competition, especially against Weixin?

Growth in the music business is impacted by traffic competition, but high-value users (SVIP) are less affected. TME is stabilizing its SVIP base by adding benefits, including Ximalaya's long-form audio. Collaboration with Weixin Video Account is key for traffic and conversion. TME views itself as a comprehensive music-plus-audio platform, providing enriching content and channels to stay competitive.

“Well, if you look at revenue-wise, our high-value users or SVIP has not been by affected. What has been most -- have affected is for those casual on light metrics?”

asked by Lincoln Kong · answered by Liang Zhu (Executives)

What are the measurable impacts of Weixin Shai integration and upgraded AI agents on discovery, listening time, retention, or conversion, and is AI primarily for engagement/cost efficiency or direct revenue generation?

AI integration, though early, shows increased user retention, especially for high-value users, and boosts engagement through features like AI DJ and personalized playlists. The monetization path is clear: increased engagement and activity drive subscription growth. AI also improves efficiency, cuts costs, and can generate music, opening new commercial opportunities.

“Well, though is still at an early testing stage, we're very happy to see that users are using it to send their own song list, share songs, and they're using it very [indiscernible]”

asked by Alex Yao · answered by Liang Zhu (Executives)

What are TME's competitive advantages and moat in music and long-form audio IP, and its overall IP strategy?

TME's competitive advantage stems from Ximalaya's user legacy in specific demographics and content categories (kids, internet literature), deep collaboration with Tencent Video for content adaptation, and nurturing artists through partnerships like SM Entertainment. The integrated platform fosters high-quality IP, driving business growth and SVIP subscriptions.

“However, compared with our peers, our competitive advantage is there. First of all, Ximalaya has a lot of user legacy that covers what [indiscernible] and email users in Tier 1 and Tier 2 states.”

asked by Alicis a Yap · answered by Liang Zhu (Executives)

What are the drivers behind the Q2 margin changes, the outlook for gross and net margin in Q3/Q4 with Ximalaya consolidation, and thoughts on enhancing shareholder return given the large cash balance?

Slight GP margin decline is due to the growing share of offline business and artist brokerage, which have different margin profiles. Ximalaya's amortization had a positive impact. Sales expenses were controlled in Q2 by shifting to higher ROI products and leveraging the Tencent ecosystem. For H2 FY26, GP margin is projected to decrease slightly YoY, while sales and operating expenses will slightly increase, leading to a slight net margin decrease and slight EBITDA increase. Management is confident in long-term future and is preparing for another share buyback program.

“Our projection into the second half of our revenue expectation, we project that our GP margin will be decreasing slightly year-over-year.”

asked by Yifan Ye · answered by Liang Zhu (Executives)