Tencent Music Posts Strong Q1 2025 Results as Subscriptions and Premium Services Drive Growth

Tencent Music Entertainment Group (NYSE: TME; HKEX: 1698), China's largest online music and audio platform, reported solid earnings for the first quarter of 2025. The results exceeded market expectations and highlighted the company’s continued shift toward high-quality, subscription-led revenue growth.

Tencent Office in China

Financial Performance

Total revenue rose 8.7% year-on-year to RMB 7.36 billion (US$1.01 billion), driven primarily by gains in online music services. Music subscription revenue jumped 16.6% to RMB 4.22 billion (US$581 million), underpinned by both an expanding user base and higher user spending.

TME added 1.9 million new subscribers during the quarter, bringing the total number of paying users to 122.9 million, up 8.3% year-over-year. Average revenue per paying user (ARPPU) rose from RMB 10.6 to RMB 11.4, reflecting strong adoption of premium services like Super VIP (SVIP).

Net profit attributable to equity holders surged by 201.8% to RMB 4.29 billion (US$591 million), aided by a one-time gain of RMB 2.37 billion from a deemed disposal of an investment. Non-IFRS net profit attributable to equity holders rose 24.6% to RMB 2.12 billion (US$293 million), reflecting the underlying health of the core business.

Key Revenue Drivers

1. Subscription Services

Subscriptions remain TME’s primary growth engine. The launch and expansion of SVIP tiers have boosted both ARPPU and user loyalty. SVIP members enjoy higher-quality audio, early access to concerts and merchandise, and exclusive digital content, which have proven effective in driving conversions and engagement.

2. Advertising

Although not broken out in detail, advertising revenue continued its upward trajectory due to TME’s introduction of new formats, including ad-supported listening modes. AI-driven personalization is helping improve ad targeting and user relevance, contributing to incremental gains in the free user segment.

3. Merchandise and Live Events

TME has diversified its revenue with successful ventures into artist merchandise and offline experiences. Partnerships with celebrities such as G-Dragon and the launch of limited-edition physical albums have captured fan spending. Offline events like exhibitions and concerts drew significant crowds, deepening user engagement.

4. Original and Licensed Content

TME continues to enrich its platform with original music and strategic licensing deals. Renewed partnerships with Sony Music and collaborations with South Korea’s YG Entertainment and Japan’s ACG brands have broadened the international appeal of its content library. Original works such as Zhou Shen’s "To Time" and game-related soundtracks have also topped charts, reducing reliance on third-party licensing.

5. Long-Form Audio

TME is investing in long-form audio content such as audio dramas and podcasts. The success of "The Grave Robbers’ Chronicles" demonstrates demand for serialized, immersive formats that support higher user retention and monetization through premium subscriptions.

Strategic Position and Outlook

Tencent Music’s Q1 performance marks a continuation of its shift from low-margin social entertainment to subscription-based, high-margin services. The company is also exploring generative AI applications in content creation and personalization, aiming to further enhance user engagement and operational efficiency.

With a strong cash position of RMB 37.67 billion (US$5.19 billion), TME is well equipped to pursue strategic investments, expand its platform ecosystem, and sustain innovation. As it doubles down on SVIP services, international content, and AI-driven recommendations, Tencent Music is positioned for steady, profitable growth.

Conclusion

Tencent Music’s first-quarter results underscore the success of its premium-led strategy. With expanding subscription revenues, enhanced content offerings, and growing user engagement across digital and physical touchpoints, the company is on track for sustainable growth in 2025 and beyond.

Disclaimer: This article is for educational and informational purposes only and should not be considered financial or investment advice. All investments carry risks, including potential capital loss. Readers should conduct their own research and consult a qualified financial professional before making any investment decisions. The author and publisher are not responsible for any financial losses incurred based on the information provided.