Citi expects Tencent Music's performance last quarter to meet or slightly exceed expectations

Citi released a report, expecting Tencent Music (01698.HK) to meet or slightly exceed expectations for its Q4 2025 performance, primarily due to stable subscription services and accelerated growth in non-subscription music revenue. Looking ahead to 2026, the bank believes key points of focus include the competitive landscape and potential threats from Douyin's Soda Music, SVIP conversion rates and average revenue per user trends, online advertising revenue, updates on concert revenue, the latest status of Himalaya, and trends in gross margin and operating profit margin.

Although the bank believes that the rapid growth of Soda Music user metrics may not directly impact Tencent Music's core user base in the short term, competitive concerns will continue to suppress stock price performance. Additionally, the latest integration of artificial intelligence, as well as how AI technology facilitates or disrupts music creation and changes user behavior, are important trends worth monitoring. The bank maintains a "Buy" rating on Tencent Music (TME.US) with a target price of $29.

Furthermore, the bank expects Tencent Music's total revenue for Q4 last year to grow by 13% year-on-year to RMB 8.43 billion, with adjusted net profit reaching RMB 2.5 billion, compared to market expectations of RMB 8.43 billion and RMB 2.49 billion. As for the first quarter of this year, the bank anticipates Tencent Music's total revenue to grow by 16% year-on-year to RMB 8.5 billion, with adjusted net profit reaching RMB 2.47 billion, while market expectations are RMB 2.4 billion