Tencent Music's Hong Kong stocks plummet 22%: Monthly active users decrease by 5% year-on-year, facing challenges to its moat

Leidi Network, March 18 The online music and audio entertainment platform Tencent Music Entertainment Group (referred to as "TME", NYSE stock code: TME and HKEX stock code: 1698) saw its Hong Kong stock drop over 20% today. According to the financial report, Tencent Music's revenue for 2025 is expected to be 32.9 billion yuan (4.71 billion USD), an increase of 15.8% compared to 28.4 billion yuan in the same period last year. Tencent Music's net profit attributable to equity holders for 2025 is expected to be 11.06 billion yuan (1.58 billion USD), a year-on-year increase of 66.4%, due to the company recognizing a deemed disposal gain of 2.37 billion yuan (339 million USD) from an investment in the first quarter of 2025; the non-IFRS net profit attributable to equity holders is expected to be 9.59 billion yuan (1.37 billion USD), a year-on-year increase of 25.0%. Among them, Tencent Music's revenue for the fourth quarter of 2025 is expected to be 8.64 billion yuan (1.24 billion USD), a year-on-year increase of 15.9%, mainly benefiting from the year-on-year growth of online music service revenue. Although Tencent Music's performance is impressive, its stock price plummeted over 22% after the Hong Kong market opened, and as of now, the company's stock price is 44.34 HKD, with a market value of 137.357 billion HKD. Analysts believe that the core reason for the stock price drop after the release of Tencent Music's fourth-quarter financial report for 2025 is that the market has raised doubts about its future growth logic beneath the surface of profit growth. Despite revenue and profit exceeding expectations, key user metrics have declined, growth models are constrained, and external competition has intensified, leading to a reassessment of its medium- to long-term value in the capital market. The market is not denying current profitability but is questioning the sustainability of its future growth. The core logic that previously supported the stock price was "steady increase in user numbers + continuous improvement in ARPPU (average revenue per paying user) = profit release," but this formula is becoming ineffective. In the fourth quarter of 2025, Tencent Music's online music service MAU (monthly active users) decreased by 5% compared to the same period last year. This marks a continuous decline over several quarters, reflecting that user engagement is severely diverted by short video platforms (such as Douyin and Kuaishou) and emerging music apps like "Soda Music." Additionally, Tencent Music's ARPPU growth has stagnated, and the pricing power has peaked. Despite Tencent Music's paid users increasing to 127.4 million in the fourth quarter of 2025, a year-on-year growth of 5.3%, the average revenue per paying user (ARPPU) is only 11.9 yuan, remaining flat quarter-on-quarter and below the market expectation of over 12 yuan. The model of relying on membership price increases to drive revenue growth has nearly reached its limit, and further price hikes are becoming more difficult in the current consumption environment. Currently, the moat is under challenge, as ByteDance's "Soda Music," supported by Douyin's traffic, has surpassed 120 million monthly active users, forming a "tripod" competitive situation. The new model of music consumption that combines algorithmic recommendations with short videos is also weakening Tencent Music's traditional advantage centered around copyright. ———————————————