Tencent Music defies expectations: Insights into Q3 growth

Tencent Music Entertainment Group exceeded analysts' expectations in the third quarter of 2024 with a revenue growth of 6.8% year-over-year to one billion USD. Revenue from the online music services segment increased despite a decline in the social entertainment services segment. However, the adjusted earnings per American Depositary Share disappointed analysts, coming in at 0.16 USD, while they had expected 0.17 USD. This development led to a drop in the stock price following the release of the quarterly figures. Monthly active users (MAUs) for online music recorded a decline of 3.0% to 576 million, whereas the mobile MAUs for social entertainment decreased significantly by 30.2% to 90 million. Nevertheless, online music subscriptions experienced a substantial increase of 15.5% to 119 million paying users. Revenues in the online music segment rose by 20.4% to 781 million USD, with music subscription revenues increasing by 20.3% to 547 million USD. In contrast, revenues from social entertainment services and other areas decreased by 23.9% to 219 million USD. A positive highlight is the gross margin, which increased by 690 basis points to 42.6%. This increase is attributed to robust growth in music subscription and advertising service revenues, as well as enhanced production of original content. Operating income rose impressively by 50.5% to 306 million USD, while operating cash flow for the quarter was 309 million USD. As of the end of September, the company's total balance of liquid assets amounted to 5.14 billion USD. Executive Chairman Cussion Pang emphasized that the strong quarterly results reflect the company's focus on quality growth, with the growing number of music subscribers and diversified services being the main focus. CEO Ross Liang highlighted that the strategy to enhance user privileges and premium memberships has increased loyalty and expanded the paying user base.