Tencent Music Entertainment (TME.N): 2Q26 Revs Small Beat with Non-IFRS NP Solid Beat

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11 Aug 2026 06:28:57 ET │ 11 pages

Tencent Music Entertainment (TME.N)

2Q26 Revs Small Beat with Non-IFRS NP Solid Beat

CITI'S TAKE

TME reported 2Q26 total revs of Rmb8.93bn (+5.8% yoy), +2.7/+2.0% vs.

our/consensus estimate of Rmb8.70bn/8.75bn, driven by: 1) 11.0% yoy

increase in music related services revs to Rmb7.61bn, 4% above our

estimate of Rmb7.31bn, contributed by solid growth in marketing and

offline performance revenues, supplemented by growth in membership

service revenues. Subscription revs grew 8.1% yoy to Rmb4.79bn,

representing c.54% of total revs, vs our Rmb4.5bn and non-sub revs of

Rmb2.81bn, inline with our forecast of Rmb2.8bn; 2) social entertainment

revs amounted to Rmb1.33bn, -16.4% yoy, 4% below our forecast of

Rmb1.39bn. Non-IFRS NP came in at Rmb2.78bn, +5.3% yoy, and

8.0/10.4% above our/Consensus Rmb2.57bn/2.52bn, mainly attributed

to higher revenues and gross profit slight beat, lower S&M partly offset by

higher G&A.

Implications – We view TME’s 2Q26 results as solid and attribute the slight

outperformance vs our/consensus estimate to the consolidation of Ximalaya.

Specifically, mgmt highlighted that the growth of membership service revs was

driven by consolidation of Ximalaya and the expansion of its SVIP membership while

the robust yoy growth in offline performance revs was contributed by concerts

events. Mgmt also noted that consolidation of Ximalaya had a positive impact to

gross margins. On the call, we hope to get update on the synergies and revenues

contribution from Ximalaya for 2H26, updated margins and profit guidance for

FY26, latest competitive impact from Soda Music on user growth and advertising

budget sentiment and future growth opportunity for offline concert performance

and SVIP growth.

Buy

Price (10 Aug 26 16:00)

US$9.90

Target price

US$13.00

Expected share price return

31.3%

Expected dividend yield

2.4%

Expected total return

33.7%

Market Cap

US$15,582M

Alicia Yap, CFAAC

Nelson Cheung

Vicky Wei, CFA

GpM at 44.2% — Gross profit +5% yoy to Rmb3.95bn, with GpM slightly decreasing

yoy and qoq to 44.2%, from 44.4% in 2Q25 and 44.9% in 1Q26, which is also slightly

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