Tencent Music Entertainment Group (TME) Q2 2024 earnings summary

Executive summary

• Achieved 28% year-over-year growth in online music services and 26% growth in adjusted net profit, with over 10 million net new music subscribers in H1 2024 and rising ARPU, reflecting strong momentum in China's streaming market.

• Total revenues for Q2 2024 were RMB 7.16 billion, down 1.7% year-over-year, mainly due to a sharp decline in social entertainment services, partially offset by robust growth in online music services.

• Net profit reached RMB 1.79 billion, up 33.1% year-over-year, with non-IFRS net profit at RMB 1.99 billion, up 25.7%.

• Expanded content ecosystem through new and renewed partnerships with major artists and labels, exclusive privileges, and successful digital album launches, driving user engagement and conversion.

• Offline live performances and flagship events like TMEA 2024 contributed to significant year-over-year revenue growth from offline activities.

Financial highlights

• Q2 2024 total revenue was RMB 7.2 billion, down 2% year-over-year, as strong online music growth offset declines in social entertainment.

• Online music revenue rose 28% year-over-year to RMB 5.4 billion; music subscription revenue grew 29% to RMB 3.7 billion, with ARPPU up to 10.7 and paying users reaching 117 million (18% increase year-over-year).

• Non-GAAP net profit increased 33% year-over-year to RMB 1.8 billion; diluted earnings per ADS hit a record RMB 1.07, up 30% year-over-year.

• Gross margin improved to 42%, up 7.7 percentage points year-over-year, driven by subscriber growth, ARPU improvement, and cost management.

• Social entertainment and other revenues fell 43% year-over-year to RMB 1.7 billion.

Outlook and guidance

• Expects continued healthy revenue and profit growth for 2024, with ARPPU expansion becoming a more significant driver than net adds in H2.

• Anticipates advertising revenue to perform well, supported by ad-supported formats and offline event sponsorships.

• Net adds in H2 2024 projected to be lower than H1, but ARPPU to grow at a faster pace, supporting margin improvement.

• Confident in achieving mid- and long-term subscriber targets and maintaining steady growth in paying user penetration.

• Management remains optimistic about the long-term potential of the music industry and is committed to sustainable, balanced growth.