Tencent Music Entertainment Group (TME) Q1 2025 Earnings Call Highlights: Strong Growth in ...

GuruFocus News

Wed, May 14, 2025, 6:01 AM 4 min read

• Revenue: RMB7.4 billion, 9% year-over-year growth.

• Online Music Revenue: RMB5.8 billion, 16% year-over-year increase.

• Music Subscription Revenue: RMB4.2 billion, 17% year-over-year increase.

• Monthly ARPPU: Increased to RMB11.4 from RMB10.6 in Q1 2024.

• Gross Margin: Improved to 44.1%, up 3.2 percentage points year-over-year.

• Operating Expenses: Decreased to 15.5% of revenue from 16.8% in the same period last year.

• Effective Tax Rate: 9.2%, down from 19.9% in Q1 2024.

• Net Profit: RMB4.4 billion.

• Non-IFRS Net Profit: Increased by 23% to RMB2.2 billion.

• Diluted Earnings per ADS: RMB2.77.

• Non-IFRS Diluted Earnings per ADS: RMB1.37, up 26% year-over-year.

• Cash, Cash Equivalents, and Short-term Deposits: RMB37.7 billion as of March 31, 2025.

• Warning! GuruFocus has detected 3 Warning Sign with TME.

Release Date: May 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

• Tencent Music Entertainment Group (NYSE:TME) reported a strong first quarter performance with robust topline growth and increased profitability.

• The company renewed multiyear contracts with major record labels like Sony Music Entertainment, enhancing its music library with premium audio features.

• TME's SVIP membership program saw growth, driven by unique perks such as premium sound quality, early access to merchandise, and exclusive event privileges.

• Advertising revenues achieved strong year-over-year growth, supported by innovative ad-supported models and interactive features.

• The company reported a 17% year-over-year increase in music subscription revenues, with a rise in monthly ARPPU, indicating effective monetization strategies.

• Social entertainment services and other revenues declined by 12% year-over-year, indicating challenges in this segment.

• The company has ceased disclosing operating metrics for its social entertainment business, suggesting a strategic shift away from this area.

• Despite strong growth in music subscriptions, the company faces challenges in monetizing nonpaying users, relying heavily on advertising and fan merchandise.

• The podcast market in China remains limited in coverage, presenting challenges for growth in this segment.

• While gross margins improved, the company must continue to manage costs effectively to sustain profitability amidst competitive pressures.

Q: Can management share more about the outlook for topline profit growth for the next quarter and full year 2025? A: Cussion Kar Shun Pang, Executive Chairman, stated that the strong Q1 results give confidence for 2025. The company expects year-over-year growth to accelerate, driven by music subscriptions and SVIP program expansion. Improved advertising performance and deeper partnerships with music labels and artists will also contribute to revenue growth.