Tencent Music will release its fiscal year 2025 third-quarter earnings report before the U.S. market opens on November 12. The market is focusing on the growth and profitability resilience of its online music services. According to predictions from the Tiger International APP data source, Tencent Music’s third-quarter revenue is expected to be 8.225 billion yuan, an increase of over 17% year-on-year; adjusted earnings per share (EPS) is expected to be 1.52 yuan, up over 31% year-on-year.
Market Forecast
The market consensus expects total revenue of approximately USD 8.225 billion for this quarter, an increase of 17.24% year-on-year; EBIT around USD 2.608 billion, up 25.14% year-on-year; and EPS about 1.523 yuan, up 31.32% year-on-year. Previous guidance from the company indicated sustained double-digit growth in online music services driven by subscriptions and non-subscriptions (advertising, performances, and peripherals), with gross margin showing structural improvement, and adjusted EPS and operating profit margin maintaining stable upward trends. The main business highlights include online music service revenue reaching 6.854 billion yuan in the previous quarter, up 26.4% year-on-year, driven by balanced contributions from subscriptions and advertising, offline performances, and a significant improvement in user value. The most promising business sector for future development is the online music service segment, which saw revenue of 6.854 billion yuan last quarter, growing 26.4% year-on-year, accounting for 81.2% of total revenue, underpinned by SVIP penetration, ARPPU enhancement, and diversified monetization.
Last Quarter Review
In the previous quarter, the company achieved revenue of 8.442 billion yuan, up 17.90% year-on-year; gross margin of 44.41%, up approximately 2.41 percentage points year-on-year; net profit attributable to the parent company was 2.409 billion yuan, up 43.20% year-on-year, with a net profit margin of 28.54%; and adjusted EPS was 1.66 yuan, up 39.50% year-on-year. In terms of business structure, online music service revenue reached 6.854 billion yuan, up 26.40% year-on-year, while non-subscription revenue from advertising and offline performances grew strongly, with social entertainment and other revenue at 1.588 billion yuan, down 8.50% year-on-year. The key highlight in the core business was the increase in the proportion of online music service revenue to 81.2%, driven by paid subscriptions and SVIP privileges, which boosted ARPPU to 11.7 yuan (up approximately 9.3% year-on-year), forming a more optimal profit structure.
Current Quarter Outlook
Certainty and drivers of online music growth
Subscription and non-subscription dual engines sustained high-quality growth from the last quarter, with management focusing on SVIP privileges and high-definition audio quality, priority purchase of artist digital albums, offline performance ticket privileges, and other combinations to enhance paid conversion and retention. Last quarter, SVIP scale exceeded 15 million, ARPPU increased to 11.7 yuan, providing a solid foundation for revenue and gross margin performance this quarter.
In non-subscription revenue, the proportion of advertising, offline performances, and peripheral merchandise continued to rise; second-quarter non-subscription online music revenue was strong, with media reports indicating advertising revenue increased more than 30% year-on-year, and offline performances and peripherals realizing doubled growth. Although short-term sporadic factors exist, the mid-term resilience brought by brand and ecological niche enhancement is more crucial. If this momentum continues this quarter, the elasticity of EBIT and adjusted EPS will be better than the revenue growth rate.
Cost-side optimization and improved copyright sharing structure provide room for profit margin enhancement. Over the past few quarters, the company maintained discipline in copyright sharing, sales, and marketing expense control areas, reducing the three expense rates to lower levels, and the proportion of social entertainment decreased, contributing to the steady improvement of overall gross margin and net profit margin. The market expects EBIT this quarter to grow approximately 25% year-on-year, matching the structural optimization.
Marginal contribution from user value improvement and ecosystem expansion
Online music MAU was 553 million last quarter, down year-on-year, but paid users reached 124.4 million, up 6.3% year-on-year, indicating that the strategy of "converting quantity to quality" is effective. This quarter will continue to focus on core privileges to enhance stickiness, with paid users and ARPPU expected to remain steady, and subscription revenue to maintain double-digit growth.
Offline performances and artist peripheral business drive brand and ecosystem expansion, strengthen cooperation with top IPs, enhance the depth of music content stack, and monetization radius. Although the profit margin of the performance business is relatively low, the platform influence and synergy with advertising and membership will gradually translate into a stable cash flow contribution in subsequent quarters.
Content system expansion represented by the integration effect of long audio is expected to improve platform engagement time and cross-selling opportunities. If the consolidation progresses as planned, this quarter is expected to see increased usage time and activity in operating indicators, providing support for mid-term growth.
Continuous impact of social entertainment contraction and structural optimization
Social entertainment and other business revenue was 1.588 billion yuan last quarter, down 8.5% year-on-year, affected by industry competition and regulatory environment. This quarter is expected to continue the contraction trend. The decline in the proportion of this segment reduces reliance on low-margin businesses, contributing to the stable performance of overall group profit margin.
The logic of structural optimization lies in the increase in the proportion of high-margin projects centered on online music, the reduction in the sharing ratio of social entertainment businesses, and controlled expense rates, forming a healthy loop of "revenue growth – gross margin improvement – profit enhancement."
In terms of competition, some competitors exert pressure on user scale and engagement time, but the gap in copyright and commercialization capabilities remains. Tencent Music forms a differentiated barrier in terms of user value and monetization efficiency through SVIP privileges, exclusive content, and offline ecological synergy. The sensitive point for stock prices this quarter is the continuity of non-subscription business and the maintenance of profit margin. If advertising and performances continue to perform strongly, the profit elasticity may be further validated.
Analyst Opinions
Bullish views dominate. Barclays' report on August 12, 2025, described Tencent Music's latest earnings report as "perfect in every way" and stated it was "difficult to say what was most impressive this quarter," as the company "exceeded high market expectations in all key metrics," raising the target price from USD 16 to USD 27. Its core arguments included online music service revenue of 6.854 billion yuan, up 26.4% year-on-year, non-subscription online music revenue significantly exceeding expectations, advertising revenue growing more than 30% year-on-year, and offline concerts and peripheral merchandise doubling growth; on the profitability side, adjusted net profit margin reached approximately 31.3%, significantly higher than the same period last year. Media interpretation of the second quarter also emphasized the increase in penetration of subscriptions and SVIP, ARPPU rising approximately 9.3% year-on-year, and increased operational efficiency brought by the decline in the three expense rates. Considering various views, market focus this quarter will be on whether high-quality growth in online music continues, and the sustainability of non-subscription business in advertising, performances, and peripherals. If strong performance persists, the "double high" revenue and profit structure will be further consolidated.
This content is generated based on Tiger AI data and is for reference only.