Tencent Music (TME) Turns Streaming Into A Sprawling Entertainment Machine

On August 12, Tencent Music Entertainment Group (NYSE:TME) reported its second-quarter 2026 earnings, revealing that revenue reached RMB 8.9 billion, a 6% increase year over year. The audio platform Ximalaya contributed RMB 0.4 billion to this total. Music-related services revenue grew 11%, and membership revenue increased 8% to RMB 4.8 billion.

However, the more significant shift lies beyond subscription numbers, with live entertainment, concert stadiums, merchandise, and a nascent audio business driving faster-than-expected growth. Concert tours and arena shows have drawn large crowds, and fan meetings have showcased strong merchandise sales. Despite these successes, the financial picture is complex.

Adjusted EBITDA rose 5% to RMB 3.3 billion, and non-IFRS net profit increased to RMB 2.5 billion. Yet, gross margin slipped slightly to 44.2% from 44.4% a year ago, and operating expenses climbed to 14.5% of revenue. The acquisition of Ximalaya, which contributed positively to membership and advertising revenue, may not yet show long-term benefits.

The stock has seen a decrease in hedge fund ownership and a forward price-to-earnings ratio of 9.53, indicating low expected future growth. While Tencent Music's push into live entertainment and artist collaborations shows promise, its success will depend on sustained scaling and the Ximalaya acquisition's long-term viability.