Tencent Music Entertainment First Take: 1Q26 results – Floor firms, catalyst slips

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Tencent Music Entertainment First Take: 1Q26 results – Floor firms, catalyst slips

Asia Pacific Equity Research

13 May 2026

Tencent Music Entertainment

First Take: 1Q26 results – Floor firms, catalyst slips

Our First Take: Our last note (link) argued that the market is misreading Head of China Equity Research

TME on two axes: (1) it treats AI as a direct disruption to the paid model and Co-Head of Asia TMT

when the actual mechanism is AI-enabled low-end competition; and (2) it Research

underwrites a value-trap multiple when the premium IP-anchored base Alex Yao AC

supports a 10-12x P/E floor. The 1Q26 print firms our structural read, but (86 21) 6106 6505

alex.yao@jpmorgan.com

delivers a deferred catalyst with a worsened confidence overlay. On the SAC Registration Number: S1730523020001

structural side, management’s framing of AI as reinforcing premium IP Daniel Chen

scarcity aligns management’s posture with our view for the first time, as (86-21) 6106 6205

GM expanded 80bps YoY against a merch/offline mix drag, adj. OP beat daniel.q.chen@jpmorgan.com

JPMe by 9%, at Rmb2.81bn, and label renewals close the catalog-access SAC Registration Number: S1730521040001

risk channel we named as most important. On the catalyst side, the print Nancy Liu

supplies none of the potential re-engagement catalysts our note identified: (86 21) 6106 6343

nancy.liu@jpmorgan.com

no capital-return architecture beyond the paid US$370m FY25 dividend, SAC Registration Number: S1730524090001

no SVIP user count, and no paying-base decomposition. Management J.P. Morgan Securities (China) Company

discontinued quarterly paying user, MAU and ARPPU disclosures at just Limited

the moment membership revenue decelerated to +6.6% YoY (vs. +13% in TME, TME US