--- title: "TME: Qishui's Blitz, Are the Good Days Over?---" type: "Topics" locale: "zh-HK" url: "https://longbridge.com/zh-HK/topics/39307374.md" description: "On Mar 17 (Beijing time), after the HK close and ahead of the US pre-market, $Tencent Music(TME.US) released its Q4 2025 results. Q4 was a mixed bag. The 'second curve' kept gaining traction, but an unstable user ecosystem slowed subscription revenue growth, so Dolphin Research’s overall read is cautious.1) Users kept slipping. MAU fell by 23 mn QoQ in Q4, a bit worse than typical seasonal attrition. Over a longer horizon, the trend remains down.We think the company may ramp up user acquisition spend. This could include initiatives after regulatory approval of the Ximalaya acquisition..." datetime: "2026-03-17T12:01:04.000Z" locales: - [en](https://longbridge.com/en/topics/39307374.md) - [zh-CN](https://longbridge.com/zh-CN/topics/39307374.md) - [zh-HK](https://longbridge.com/zh-HK/topics/39307374.md) author: "[Dolphin Research](https://longbridge.com/zh-HK/news/dolphin.md)" --- > 支持的語言: [English](https://longbridge.com/en/topics/39307374.md) | [简体中文](https://longbridge.com/zh-CN/topics/39307374.md) # TME: Qishui's Blitz, Are the Good Days Over?--- Beijing time Mar 17, after HK close and before U.S. pre-market, $Tencent Music(TME.US) released its Q4 2025 results. Q4 was mixed: the second growth curve kept delivering, but the user ecosystem remained shaky, slowing subscription revenue growth, so Dolphin Research's overall take is cautious. Here are the details. Key takeaways follow. **1) Ongoing user attrition:** MAU fell by 23 mn QoQ in Q4, a somewhat larger seasonal drop than usual, and the longer-term trend is still down. We think TME may step up user acquisition spend, and after the Ximalaya deal clears, broader content and expanded membership benefits could help drive subs. **2) Subscription growth losing steam:** Subscription revenue rose 13% in Q4, with net adds of 1.7 mn subs. Momentum improved QoQ, but pricing/SVIP penetration likely paused, as ARPPU held flat at RMB 11.9 per month. Subscriptions account for over half of revenue and are the key pillar of TME's valuation. The other roughly half is led by social entertainment, which no longer contributes growth, while 'other music' is not yet a full earnings anchor (29% of revenue). Although TME has monetized only 24% of its 500 mn+ user base, fiercer competition is forcing a slower conversion push. If subscription revenue does not re-accelerate back above 15% soon, even tighter cost control and higher profits may not persuade the market to award a \>20x P/E in the near term. **3) Second curve still firing:** 'Other music' again beat in Q4, up 41%, driven by ads, album sales, and offline concert tickets/merch for multiple artists. Growth decelerated, but the high-growth trend remains intact for now. Jay Chou is set to release a new album in late Mar after a four-year gap. The last album's digital exclusive with TME generated over RMB 200 mn; if exclusivity repeats, it should add a visible lift to 'other' revenue. **4) Social entertainment bottoming:** Live streaming and karaoke revenue fell 5% in Q4. The segment appears to be at a low but largely stabilized. **5) Cost discipline:** GPM improved slightly by ~100 bps YoY and QoQ in Q4, reflecting scale benefits. Core OP reached RMB 2.6 bn, up 26% and slightly above estimates. Three expense lines were broadly stable, particularly sales and marketing, which we track closely as a gauge of competitive posture. In Q4, we did not see a notable ramp in marketing; given ongoing MAU declines and aggressive rivals, Dolphin Research would not rule out higher promo spend ahead to acquire users and slow churn. **6) Strong cash supports shareholder returns:** As of Q4-end, net cash was RMB 24.3 bn (cash + ST investments minus interest-bearing debt), or about $3.5 bn. Beyond the two-year $1.0 bn buyback announced in Mar last year (slow progress, with only $65 mn disclosed in Q1), the company announced a $368 mn dividend for 2025 (payout ratio 23%). Assuming the buyback is completed by Mar 2027 and including this year's dividend, total shareholder returns would approach ~$1.2 bn. Versus the current $23.4 bn market cap, the potential yield of ~5% is not low, but if buybacks remain slow, the valuation floor from returns will weaken. **7) Detailed financials** **Dolphin Research View**. Key points below. Since the Q3 print, TME has dropped ~30%, notably underperforming China ADRs. NetEase Cloud Music showed a similar pattern, and both digital music leaders now trade near 13x P/E (vs. the 10x P/E trough in 2022–2023). The core overhang is competition risk — both from traditional rival 'Qishui Music' siphoning traffic and from AI encroaching on licensed music platforms. By early 2026, Qishui Music's MAU reached 140 mn, narrowing the gap with Cloud Music. With stickier traffic (80%+ sourced from Douyin), its ~50 mn DAU already tops Cloud Music and is nearing standalone QQ Music or KuGou. If we apply QQ Music's DAU/MAU stickiness ratio (~28%) to TME's 560 mn MAU, that implies ~160 mn DAU, or about 3x Qishui. The gap will likely shrink, but strategic positioning within ByteDance matters. **The two may converge further, but Qishui's role inside ByteDance differs** — it's an adjunct to strengthen Douyin's closed loop, with P&L responsibility that favors lower-cost 'Douyin hits' and emerging artists. **Meanwhile, WeChat Channels is also funneling traffic to TME, pointing to a high-probability 'coexistence' equilibrium.** Qishui's core users are price-sensitive Douyin users with more fragmented, background audio/video needs. Users seeking top-tier licensed catalogs and having established music consumption habits, especially for exclusives, are more inclined toward TME. QM data show Qishui's overlap with QQ Music users at only 13%, not high. During Qishui's rise, QQ Music users remained stable, while the impact fell more on value-focused KuGou. **AI's negative impact mainly comes from AIGC challenging traditional licensed content.** AI lowers creation barriers and dilutes the 'professional' premium of licensed music. For example, KuGou and ByteDance launched an AI singer 'Daitouzhen' last year that, despite only doing covers, achieved monthly plays comparable to certain tier-1/2 artists. **Reshaping the competitive landscape will be painful for incumbents, especially in today's most intense phase.** The post-2021 truce between Tencent and NetEase has ended. As the defender, TME will likely invest more to mitigate user churn and build revenue beyond subs — via product/content innovation and user acquisition — which may pressure margins. Management already noted that more offline concerts and album sales can lift both COGS and opex, causing short-term margin volatility. TME's prior 13x P/E trough in 2026 reflected these stacked concerns; recent rebounds on lower 'Apple tax' and improved China ADR sentiment help, but **returning to a \>20x P/E on a two-year view looks tough given profit growth under competition and the uncertainties above.** **Watch for 2026 shareholder return plans on the call (a bullish case could imply ~5% yield).** With competition still intense, the downside case relies on two supports — **strong cash enabling higher shareholder returns** and **traffic benefits from Tencent's ecosystem**. Benchmarking to internet platforms' ~15x P/E, 2026E net profit of RMB 11 bn implies ~$23.9 bn equity value, leaving little upside vs. yesterday's close. If geopolitics do not worsen and sentiment improves (e.g., Jay Chou's late-Mar album launch), adding the 2.5% Spotify stake at ~$2.7 bn lifts SOTP to ~$26.6 bn, implying a 10%–15% beta-driven rebound. **Detailed analysis below**. Sections follow. **I. User ecosystem: competition drives ongoing MAU decline; paid penetration still rising** Q4 MAU fell by another 23 mn to 528 mn. While Q4 is usually seasonally weak, the downtrend persisted without an obvious slowdown in attrition. Paid music subs rose by 1.7 mn QoQ to 127 mn, taking the pay rate to 24%. Penetration improved despite the MAU headwind. ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/85babe855e286b0f21c2a81962db260a?x-oss-process=style/lg) **II. Online music: subscription deceleration; second growth curve still working** **1) Subscriptions: slowdown with volume-for-price trade-offs** Q4 subscription revenue grew 13.2%, with 1.7 mn net adds, and ARPPU at RMB 11.9 per month. The quarter appeared to pause the recent 'price hike' trend, likely reflecting a broader return of promo discounts. As the core pillar today, slower sub growth directly tempers the market's forward growth expectations. This is also likely the peak period of competitive pressure on conversion. A potential catalyst is long-form audio post-Ximalaya consolidation, which could bring new users. The two platforms have only 10%–15% overlap, and music is a universal need, so a bundle (e.g., RMB 1–2 add-on for existing members) could convert well. ![图表描述已自动生成](https://pub.pbkrs.com/uploads/2026/cf27d765df3cbb3bfed2ffaff320ed91?x-oss-process=style/lg) **2) Other music services: bearing the second-growth-curve role** 'Other music' stayed ahead of expectations in Q4, up 41%. Growth eased but remained in a high-growth band, and the segment now accounts for ~30% of total revenue. This bucket includes ads, digital album sales, licensing, and value-added services. In Q4, TME staged two Taipei shows of G-DRAGON's tour, totaling 20 shows across eight APAC cities for the year. Merch expansions also added revenue, including the KIT album with Ed Sheeran and collectible editions with stars like Lay Zhang. These IP-adjacent monetization plays target fans; while the audience is smaller than mass music users, per-capita spend is high, and China's core fans are on par with Western markets. **3) Social entertainment: choppy recovery** Q4 revenue fell 5%, leaving the segment near the bottom. A gradual return to positive growth or stability looks possible this year. **III. Profit: cost control now; refocus or re-expand ahead?** GPM ticked up QoQ in Q4, reflecting scale economies. Opex grew, but absolute ratios and marginal changes do not signal a full-on expansion, and given the current competition, higher investment is plausible. Core OP reached RMB 2.6 bn, up 26% YoY vs. total revenue growth of 16%. OPM rose 200 bps QoQ to 30%. ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/3c4b80f4544d13919557ef03a3044328?x-oss-process=style/lg) ![图表, 条形图描述已自动生成](https://pub.pbkrs.com/uploads/2026/4e178318b256c86b185a56aaf08955b5?x-oss-process=style/lg) **Dolphin Research: recent work on 'TME'** Risk disclosure and disclaimer: [Dolphin Research disclaimer and general disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### 相關股票 - [ByteDance (BYTED.NA)](https://longbridge.com/zh-HK/quote/BYTED.NA.md) - [喜马拉雅控股 (21213.HK)](https://longbridge.com/zh-HK/quote/21213.HK.md) - [TME-SW (01698.HK)](https://longbridge.com/zh-HK/quote/01698.HK.md) - [Tencent Music (TME.US)](https://longbridge.com/zh-HK/quote/TME.US.md) - [TENCENT (00700.HK)](https://longbridge.com/zh-HK/quote/00700.HK.md) - [Tencent (TCEHY.US)](https://longbridge.com/zh-HK/quote/TCEHY.US.md) - [TENCENT-R (80700.HK)](https://longbridge.com/zh-HK/quote/80700.HK.md) - [Tencent Holdings Limited (TCTZF.US)](https://longbridge.com/zh-HK/quote/TCTZF.US.md) - [Tencent HK SDR 10to1 (HTCD.SG)](https://longbridge.com/zh-HK/quote/HTCD.SG.md)