Tencent Music (TME) Q4 FY25 earnings call: guidance and Q&A

What is TME's strategic growth outlook for 2026, and how does the company plan to capture opportunities and address challenges from AI and growing industry competition?

TME delivered solid 2025 results with healthy subscription growth and impressive non-subscription momentum. The 3-tier membership system and SVIP scaling to over 20 million users are key. Non-subscription offerings like live concerts and merchandise are expanding. While competition is not new, TME's content and platform strategy will drive high-quality growth. Subscription revenue may face short-term pressure in 2026, but diversified services will ensure holistic growth. AI will be embraced to improve user experience and content creation efficiency.

“We remain focused on long-term value creation, and we believe that our unique content and platform strategy will continue to deliver the high-quality growth in a healthy way. Whether it's home or what we firmly believe that content will lasting value is IP-driven and robust IPs will always enjoy the long legacy and their value will be further enhanced through bought-in distribution, cross-media collaborations and diverse monetization opportunities and the rapid revenue growth of our expansive non-music subscription services over the past 2 years illustrated our strength and capability in this regard.”

asked by Alicia Yap · answered by Unknown Executive

How does TME view AI's impact on the overall music value chain, how will it integrate AI, and what are management's thoughts on AI's impact on music labels, streaming platforms, and user behavior?

AI is profoundly changing the music industry, with hit songs created by AI emerging. TME embraces AI by providing creation tools for creators and giving distribution resources to both human-created and AI-generated content. The company is addressing copyright infringement risks with AI content. TME is a leader in integrating AI, with over 10 million users and 150,000 professional creators using its AI music production platform. AI agents are also being developed to help users. While AI presents challenges, it is seen as a huge opportunity, especially for improving IP creation efficiency and optimizing offline music experiences.

“We've already provided a one-stop AI music production tool over tens of millions of average users and over 150,000 professional creators already using our tools. We're also one of the very first of platforms here at home to achieve very good commercial value on AI-generated content.”

asked by Unknown Analyst · answered by Kar Shun Pang

Given investments in content and IP, how should investors think about the trend for GP margin, OpEx, and earnings growth for 2026 from a financial perspective?

For 2026, GP margin is expected to stay flat or be slightly lower than 2025, driven by subscription and advertising growth, cost optimization, and positive impact from iOS commission fee adjustments. New businesses like live concerts and merchandise may have a minor negative impact initially. Operating profit will continue to improve, but the margin might be similar to or a bit lower than 2025 due to competitive landscape, AI changes, and continued investment in content and user ecosystem. ROI-focused spending will be maintained.

“In general, our 2026 GP will stay flat with 2025. We'll be a little bit lower than 2025. ... Into 2026, our total net profit will be improved and the margin will be similar to 2025, might be a bit lower than 2025.”

asked by Thomas Chong · answered by Min Hu

Are AI-generated music content creating incremental demand or is it a zero-sum game for music consumption? Will AI demand for music content generation eat into the royalty pool, requiring business model changes?

AI is changing the nature of the music industry, with short-form video boosting AI-generated music, though many are re-sung versions. While AI-generated content is original, the quality is changing. The consumption of original songs is not seeing big changes. UGC music, similar to text/videos, will be distributed among familiar users, but material changes to royalty and revenue sharing from PGC/OGC are not expected. If AI-generated music is still sung by humans, royalty mechanisms remain the same; if wholly AI-made, a different model may apply, but it won't materially impact current business.

“In the long run, the re-sing by AI will experience a rapid development. But in terms of the question you just asked about the consumption of the original songs, we are not aware of big changes.”

asked by Alex Yao · answered by Liang Zhu

Can TME provide an update on the proposed Ximalaya acquisition deal and management's latest thoughts on the share repurchase program, given the large quota remaining?

TME is still communicating with the regulator regarding the Ximalaya deal and will disclose any updates. The company values shareholder returns, evidenced by a higher dividend payout this year. The share buyback program will stick to the previous plan, responding to market needs while meeting regulatory requirements.

“Well, we're still communicating with the regulator on the Ximalaya deal. If there is any update, we will disclose at that point.”

asked by Unknown Analyst · answered by Liang Zhu