China’s Tencent Music Reports $1.32 Billion in Q2 Revenue as Ximalaya Integration Marks New Audio Push

Tencent Music Entertainment Group (TME), the Chinese digital audio powerhouse behind platforms such as QQ Music, Kugou Music, and Kuwo Music, has reported a robust financial performance for the second quarter of 2026. Total revenues climbed to RMB8.93 billion ($1.32 billion), representing a 5.8% increase compared to the same period last year. This growth was largely propelled by the company’s music services division, which posted double-digit gains, and the initial financial contributions from Ximalaya, the long-form audio platform that was fully integrated into TME’s books following the closure of its acquisition on May 18. Notably, Ximalaya—often described as China’s answer to Audible and a major player in the country’s podcasting space—added $60 million in revenue during its first full quarter of consolidation.

Music-related services revenues reached $1.12 billion, up 11% year-over-year, with membership subscriptions alone generating $706 million, an 8.1% uptick. This steady growth in paid subscribers underscores the company’s ability to monetize its vast user base, which spans over 600 million monthly active users across its ecosystem. On a non-IFRS basis—a metric that excludes share-based compensation and acquisition-related amortization to offer a clearer view of operational health—adjusted EBITDA hit $480 million, a 5.2% rise from the prior year. Non-IFRS net profit attributable to equity holders grew 4.4% to $396 million, while diluted earnings per American Depositary Share (ADS), each representing two Class A ordinary shares, reached RMB1.70 ($0.25), compared to RMB1.66 in the second quarter of 2025. The company’s liquidity position remained formidable, with cash, cash equivalents, term deposits, and short-term investments totaling $6.52 billion as of June 30. During the quarter, TME also repurchased 43.5 million ADSs for approximately $400 million, a move that signals confidence in its long-term prospects and provides a cushion for shareholders.

Leadership struck an optimistic tone regarding the strategic direction. Executive Chair Cussion Pang highlighted that “concerts, merchandise, and other IP-driven experiences drove another quarter of solid growth in our marketing and consumption services,” while emphasizing that the Ximalaya integration had “broadened our reach and enriched our ecosystem.” CEO Ross Liang echoed this sentiment, calling the acquisition “an exciting milestone” that positions the company to deliver a richer audio experience and serve users more effectively. “Together, we are shaping the future of music and audio entertainment and unlocking long-term growth,” Liang added. The company’s product innovations during the quarter included vertical swipe-based discovery features and expanded freemium access, both designed to increase daily time spent per user. TME also strengthened its ties with the broader Tencent ecosystem, enhancing music distribution through Weixin Video Accounts and partnering with Weixin Pay to funnel traffic to lightweight apps like Bodian Music and Kugou Concept. A notable collaboration with Weixin XiaoWei now enables users to summon songs, curate playlists, and stream music via simple voice commands, reflecting a broader industry trend toward hands-free, AI-driven interaction.

The IP-focused content strategy continued to gain traction, with extended partnerships with Dream Music Group covering co-creation, physical merchandise, and live events. TME also aligned with Huace Film & TV, Ruyi Film, and Zhejiang Satellite TV to bring original soundtracks and music variety shows to its platforms. On the artist development front, the quarter saw releases from prominent acts including Zhou Shen’s “Blaze into Bloom” and Liu Yuning’s “Borrow a Little Light from Ordinary Days,” while rapper Gai elevated his Real G tour to stadium scale and actor-singer Steven Zhang launched his debut arena tour, New Journey. Fan engagement revenue streams diversified further, with SVIP benefits expanding to include digital albums and tailored gift packages for artists such as Renjun, Lay Zhang, Aespa, and Riize. Three fan meetings for SM Entertainment’s trainee group SMTR25 were held in Macau, drawing sizable crowds and robust merchandise sales, while TME’s proprietary international IP event TIMA relocated to a larger venue amid surging fan enthusiasm. Physical releases from Kun, Chen Chusheng, Eazin Poe, and Zhou Shen also met with strong demand, underscoring the enduring appeal of tangible music products in a digital-first era.

Despite the overall positive trajectory, social entertainment services and other segments saw a 16.4% year-over-year decline to $196 million, a trend that reflects shifting user preferences and increased competition from short-video platforms. Gross margin settled at 44.2%, roughly flat against the 44.4% recorded in the same quarter of 2025, with management noting that Ximalaya’s consolidation had a favorable impact on margins. TME, which is dual-listed on the New York Stock Exchange and the Hong Kong Stock Exchange, remains a dominant force in China’s music and audio landscape. Industry analysts suggest that the Ximalaya integration could open new revenue streams in audiobooks and educational content, areas where the company has historically under-indexed. As the company continues to innovate and expand its ecosystem, investors will be watching closely to see if it can sustain this momentum in a market characterized by intense competition and evolving consumer habits.