Q2 FY2026
Filed Aug 11, 2026Tencent Music Entertainment Group Announces Second Quarter 2026 Unaudited Financial Results
Total revenues increased 5.8% year-over-year to RMB8.93 billion, led by 11.0% growth in music related services. IFRS net profit attributable to equity holders increased to RMB2.47 billion and non-IFRS net profit attributable to equity holders increased 4.4% to RMB2.69 billion, while gross margin declined to 44.2% from 44.4% and social entertainment services and others declined 16.4%.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesother | RMB8.93 billion (US$1.32 billion) | – | 5.8% |
| Cost of revenuesother | RMB4.98 billion (US$735 million) | – | 6.2% |
| Gross profitother | RMB3,949 million (US$582 million) | – | – |
| Gross marginother | 44.2% | – | – |
| Selling and marketing expensesother | RMB236 million (US$35 million) | – | – |
| General and administrative expensesother | RMB1.06 billion (US$156 million) | – | – |
| Total operating expensesother | RMB1.30 billion (US$191 million) | – | 12.0% |
| Operating expenses as a percentage of total revenuesother | 14.5% | – | – |
| Operating profitother | RMB3.04 billion (US$447 million) | – | – |
| Interest incomeother | RMB229 million (US$34 million) | – | – |
| Other gains, netother | RMB152 million (US$22 million) | – | – |
| Share of net profit of investments accounted for using equity methodother | RMB37 million (US$5 million) | – | – |
| Finance costother | RMB5 million (US$1 million) | – | – |
| Profit before income taxother | RMB3.07 billion (US$452 million) | – | – |
| Income tax expenseother | RMB514 million (US$76 million) | – | – |
| Profit for the periodother | RMB2.55 billion (US$376 million) | – | – |
| Net profit attributable to equity holders of the Companyother | RMB2.47 billion (US$364 million) | – | – |
| Non-controlling interestsother | RMB82 million (US$12 million) | – | – |
| Basic earnings per ADSother | RMB1.58 (US$0.23) | – | – |
| Diluted earnings per ADSother | RMB1.57 (US$0.23) | – | – |
| Adjusted EBITDA(inc. SBC)non-GAAP | RMB3.08 billion (US$454 million) | – | – |
| Adjusted EBITDAnon-GAAP | RMB3.25 billion (US$480 million) | – | 5.2% |
| Non-IFRS net profitnon-GAAP | RMB2.78 billion (US$410 million) | – | – |
| Non-IFRS net profit attributable to equity holders of the Companynon-GAAP | RMB2.69 billion (US$396 million) | – | 4.4% |
| Non-IFRS basic earnings per ADSnon-GAAP | RMB1.72 (US$0.25) | – | – |
| Non-IFRS diluted earnings per ADSnon-GAAP | RMB1.70 (US$0.25) | – | – |
| Net cash provided by operating activitiesother | RMB2.86 billion (US$422 million) | – | – |
| Net cash used in investing activitiesother | RMB3.72 billion (US$548 million) | – | – |
| Net cash provided by financing activitiesother | RMB6.26 billion (US$923 million) | – | – |
| Net increase in cash and cash equivalentsother | RMB5.41 billion (US$797 million) | – | – |
| Cash and cash equivalents at end of the periodother | RMB23.70 billion (US$3.49 billion) | – | – |
| Total cash, cash equivalents, term deposits and short-term investmentsother | RMB44.22 billion (US$6.52 billion) | – | – |
| Current borrowingsother | RMB5.997 billion (US$884 million) | – | – |
| Non-current borrowingsother | RMB7.142 billion (US$1.053 billion) | – | – |
| Total assetsother | RMB116.947 billion (US$17.236 billion) | – | – |
| Total equityother | RMB81.073 billion (US$11.949 billion) | – | – |
| Total liabilitiesother | RMB35.874 billion (US$5.287 billion) | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Music related servicesSolid growth in revenues from marketing and consumption services, such as offline performance related services, as well as revenues from membership services. | RMB7.61 billion (US$1.12 billion) | – | 11.0% |
| Membership servicesThe consolidation of Ximalaya contributed to the increase of membership revenues, while SVIP membership continued to expand. | RMB4.79 billion (US$706 million) | – | 8.1% |
| Marketing and consumption servicesGrowth was driven by offline performance related services, advertising and artist-related merchandise sales. | RMB2,813 million (US$415 million) | – | – |
| Social entertainment services and othersRevenue sharing fees decreased as both the revenue sharing ratio and revenues from social entertainment services declined. | RMB1.33 billion (US$196 million) | – | -16.4% |
Capital returns
- During the three months ended June 30, 2026, the Company repurchased 43.5 million ADSs in the open market with cash for an aggregate consideration of approximately US$400.0 million at an average price of US$9.2 per ADS.
What drove it
- The revenue generated from Ximalaya was RMB407 million (US$60 million).
- On May 18, 2026, the Company completed the acquisition of Ximalaya, and its financial results from the acquisition date were included in the consolidated financial statements for the second quarter of 2026.
- Offline performances related services achieved robust year-over-year growth as the Company staged several concerts for strategically collaborated artists.
- Concerts, merchandise and other IP-driven experiences drove solid growth in marketing and consumption services.
- The consolidation of Ximalaya had a positive impact to gross margin in the quarter.
Concerns
- Social entertainment services and others revenues decreased by 16.4% to RMB1.33 billion (US$196 million).
- Gross margin was 44.2%, compared with 44.4% in the same period of 2025.
- Cost of revenues increased by 6.2% year-over-year to RMB4.98 billion (US$735 million), mainly due to increased costs related to offline performances and higher long-form audio content costs.
- Total operating expenses increased by 12.0% year-over-year to RMB1.30 billion (US$191 million), primarily due to the consolidation of Ximalaya, including amortization of intangible assets arising from the acquisition.
- Operating expenses as a percentage of total revenues increased to 14.5% from 13.7% in the same period of 2025.
What to watch
- Membership services growth and continued SVIP membership expansion.
- The contribution from Ximalaya following its May 18, 2026 acquisition and progress on backend integration for operational efficiency gains.
- Growth in offline performance related services, concert-related revenue and artist merchandise sales.
- The trajectory of social entertainment services and others revenue.
- Cost trends related to offline performances and long-form audio content.
Balance sheet and cash flow
- Total cash, cash equivalents, term deposits and short-term investments as of June 30, 2026 were RMB44.22 billion (US$6.52 billion), compared with RMB41.00 billion as of March 31, 2026.
- Cash and cash equivalents as of June 30, 2026 were RMB23.698 billion (US$3.493 billion).
- Current borrowings as of June 30, 2026 were RMB5.997 billion (US$884 million), and non-current borrowings were RMB7.142 billion (US$1.053 billion).
- Net cash provided by operating activities was RMB2.864 billion (US$422 million).
- Net cash used in investing activities was RMB3.718 billion (US$548 million).
- Net cash provided by financing activities was RMB6.262 billion (US$923 million).
Analysis
TME reported RMB8.93 billion (US$1.32 billion) of total revenues, up 5.8% year-over-year. Music related services increased 11.0% to RMB7.61 billion (US$1.12 billion), while social entertainment services and others decreased 16.4% to RMB1.33 billion (US$196 million). Membership services generated RMB4.79 billion (US$706 million), up 8.1% year-over-year, and marketing and consumption services generated RMB2,813 million (US$415 million). The Company attributed music related services growth to marketing and consumption services, offline performance related services and membership services.
Ximalaya was consolidated from its May 18, 2026 acquisition date and contributed RMB407 million (US$60 million) of revenue. Management said the acquisition broadened user reach, enriched the SVIP offering and began a backend integration journey. The Company also cited continued SVIP membership expansion, concert-related revenue, merchandise demand and strategic content partnerships as operating developments during the quarter.
Profitability increased in absolute terms, with IFRS profit attributable to equity holders of RMB2.47 billion (US$364 million), compared with RMB2.41 billion in the same period of 2025. Non-IFRS net profit attributable to equity holders was RMB2.69 billion (US$396 million), representing 4.4% year-over-year growth, and adjusted EBITDA was RMB3.25 billion (US$480 million), representing 5.2% year-over-year growth. Gross margin was 44.2%, compared with 44.4%, as cost of revenues increased 6.2%. Operating expenses increased 12.0% and reached 14.5% of total revenues, compared with 13.7%, primarily due to Ximalaya consolidation and related intangible-asset amortization.
Cash generation was RMB2.86 billion (US$422 million) of net cash provided by operating activities. The Company ended the period with RMB44.22 billion (US$6.52 billion) of cash, cash equivalents, term deposits and short-term investments, compared with RMB41.00 billion as of March 31, 2026. It repurchased 43.5 million ADSs for approximately US$400.0 million during the quarter. The balance sheet also reported RMB5.997 billion (US$884 million) of current borrowings and RMB7.142 billion (US$1.053 billion) of non-current borrowings as of June 30, 2026.
No forward financial guidance was provided. The key reported issues for subsequent periods are whether music related services and membership growth continue to offset the decline in social entertainment services and others, the pace of Ximalaya integration, and the effect of offline performance and long-form audio costs on gross margin and operating expenses.
Management, verbatim
Our second-quarter results reflect the continued strength of our content-and-platform strategy. Concerts, merchandise, and other IP-driven experiences drove another quarter of solid growth in our marketing and consumption services, underscoring our ability to unlock greater value from premium music IP.
Cussion Pang, Executive Chairman of TME
Our focus on differentiated content and a vibrant community continues to deepen engagement with our core users, and SVIP membership continues to grow. The addition of Ximalaya is an exciting milestone that will allow us to deliver an even richer audio experience and serve our users more effectively.
Ross Liang, CEO of TME
Not in the filing
stated, not guessed- Forward financial guidance
- Prior-outlook guidance comparison
- Free cash flow
- Capital expenditures
- Dividend declaration or payment
- Income tax rate
- Operational user metrics, including MAUs, paying users, SVIP members, subscription penetration and ARPU
- Quarter-over-quarter revenue, profit, margin and segment comparisons
- Debt maturities and interest rates
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.