Tencent Music Stock Falls 15% on Declining Revenue, Monthly Active Users

Tencent Music Entertainment’s stock fell by 15% on Tuesday after declines in the leading Chinese music streamer’s quarterly revenue and monthly active users overshadowed higher profit and paid subscriber gains.

TME’s revenues of RMB7.16 billion ($985 million) edged 1.7% lower this quarter from the year-ago quarter, and monthly active users for online music services fell by 3.9%. Mobile monthly active users of social entertainment fell by 31.6% in the second quarter ending June 30 compared to the second quarter in 2023.

TME executives remained upbeat about their ongoing efforts to convert free users to paid subscribers. The quarter saw a nearly 18% year-over-year increase in online music subscriptions to 117 million, driving a 10% expansion of the company’s monthly average revenue per paying user (ARPPU).

“We have seen a steady increase in both online music subscribers and retention,” TME’s chief executive Ross Liang, said on a call discussing the company’s earnings. “We are delighted to see improved user loyalty on our platform, thanks to multi-faceted product and technological advancements that bring out increasingly engaging and entertaining music journey for each user.”

Quarterly profit was up 33% to RMB1.79 billion (US$247 million) compared to the year-ago quarter and up 17% from the first quarter this year. Revenue from the company’s online music services jumped 27.7% to RMB5.42 billion (US$746 million) thanks to music subscription revenues rising nearly 30% to RMB 2.89 billion ($403.8 million).

That drove the company’s gross margin up to 42% from 34.3% last year.

The number of paying users of social entertainment rose 5.3% to 76.9 million, but the monthly ARPPU for those users dropped 45.8%.

TME’s stock was trading at $11.16, down 15% at 12:25 p.m. in New York. While Tuesday’s sharp decline has contributed to TME’s stock falling by nearly 25% in the past month, the company’s stock is up 28% year to date.