Tencent Music Reports Record Profits Amidst Shrinking User Base and Transparency Concerns

SHENZHEN, China – March 17, 2026 – Tencent Music Entertainment (TME) today announced a blockbuster financial performance for 2025, with soaring revenues and profits driven by a strategic pivot to high-margin online music services. The company celebrated a 15.8% rise in full-year revenue to RMB 32.90 billion (US$4.71 billion) and declared a hefty US$368 million dividend. However, the triumphant financial report was overshadowed by a continued decline in its overall user base and a controversial decision to cease quarterly reporting of key user metrics, a move that spooked investors and sent the company's stock tumbling by nearly 25%.

The results paint a picture of a company successfully evolving its business model but facing undeniable headwinds in user growth. While TME is converting more listeners into paying subscribers than ever before, the shrinking pool of non-paying users raises critical questions about the long-term sustainability of its growth engine.

The Engine of Growth: Subscriptions and IP

The primary driver of TME's financial success is the robust performance of its online music services, which saw revenues climb an impressive 22.9% year-over-year to RMB 26.73 billion (US$3.82 billion). This growth starkly contrasts with the company's social entertainment services, which continued their decline with a 7.3% revenue drop for the year, a segment beleaguered by intense competition from short-video platforms like Douyin.

At the heart of this success is TME's disciplined execution of its "content-and-platform strategy," as described by Executive Chairman Cussion Pang. The company has masterfully focused on converting its massive audience into high-value subscribers. The number of online music paying users grew 5.3% in the fourth quarter to 127.4 million, while the average revenue per paying user (ARPPU) also increased by 7.2%. A key component of this is the premium SVIP tier, which has now surpassed 20 million subscribers by offering exclusive benefits like early access to concert tickets and premium audio quality.

"Our relentless focus on product enhancement and a multi-tiered, user-centric strategy drove effective subscriber conversion, deeper engagement, and increased wallet share throughout 2025," stated CEO Ross Liang in the earnings release. This strategy is clearly paying off, expanding the company's gross margin for the full year to 44.2% from 42.3% in 2024.

Beyond Streaming: Building a Music Ecosystem

Tencent Music is proving that its ambitions extend far beyond being a simple streaming utility. The company is aggressively building a comprehensive music ecosystem that unlocks new value from its intellectual property and deepens its integration into the lives of artists and fans.

In 2025, TME flexed its muscles in the live events space, notably delivering the end-to-end production for superstar G-DRAGON's 20-concert Asia Pacific tour, which attracted over 260,000 attendees. This move into live performances represents a significant and lucrative new revenue stream.

Simultaneously, TME is innovating in how music is consumed and owned. Its collaboration with international artist Ed Sheeran on a 'KIT album' for his new release, and the creation of collectible merchandise for Chinese stars like Lay Zhang and Esther Yu, demonstrate a push to blend digital access with physical ownership and fan culture. Partnerships with major labels like Warner Music Group are being deepened to include collaborations on physical albums and live performances, while a deal with Media Asia Music is bringing immersive Dolby Atmos audio to hundreds of classic tracks from legendary artists.

For artists, the Tencent Musician Platform provides tools and reach, while for fans, new social features like Weverse DM on QQ Music and enhanced functions on 'bubble' are designed to foster deeper artist-fan connections. This ecosystem approach strengthens TME's competitive moat, making its platform stickier for users and an indispensable partner for artists in the Chinese market.

The Elephant in the Room: Shrinking Users and Veiled Metrics

Despite the impressive financial figures, a significant concern lies within TME's user metrics. The number of monthly active users (MAUs) for its online music services fell by 5.0% year-over-year in the fourth quarter to 528 million. This is not a one-off dip but continues a multi-year trend of a slow but steady decline in the company's total user base, which serves as the funnel for future paying subscribers.

More alarmingly for investors, TME announced it will fundamentally change how it reports on its performance. Starting next quarter, the company will discontinue the disclosure of quarterly online music MAU, paying users, and ARPPU. Instead, it will only report the total number of paying users across all its music services annually.

While the company states it is shifting focus to revenue and profit as its primary performance indicators, the timing of the decision has been widely interpreted as an attempt to obscure the slowing user growth. Hiding these key metrics reduces transparency and makes it significantly more difficult for analysts and investors to assess the underlying health of the business and its growth pipeline. The sharp drop in TME's stock price following the announcement underscores deep market anxiety about this new lack of visibility.

Betting on the Future with AI

As it navigates these challenges, TME is placing a heavy bet on Artificial Intelligence to redefine music creation, distribution, and consumption. The company is harnessing AI on multiple fronts to maintain its innovative edge. Its one-stop AI music production platform has already empowered over 150,000 artists and 10 million users to create music, dramatically expanding the content library.

On the user-facing side, TME is leveraging a self-developed multimodal large model to enhance recommendations, leading to a record high share of recommendation-driven streams. Furthermore, its flagship app, QQ Music, has been integrated with Tencent's AI app Yuanbao, powering an 'AI Agent' that allows users to perform complex tasks—from discovering music to purchasing digital albums and merchandise—through natural language commands. This creates a seamless "intent-to-action" experience designed to drive both engagement and conversion.

This aggressive push into AI represents TME's strategy to not only optimize its current platform but to build a more intelligent, interactive, and personalized music service. By doing so, the company hopes to differentiate itself in a fiercely competitive landscape and find new pathways for growth, even as its traditional user acquisition model shows signs of saturation.