Tencent Music Entertainment (TME) published its Q4 and full-year 2025 results on Tuesday (March 17). The company revealed that its higher-priced ‘Super VIP’ tier surpassed 20 million subscribers by year-end, while full-year music subscription revenue hit RMB 17.66 billion (USD $2.53 billion), up 16% YoY.
Investors, however, were far from impressed. TME’s share price plunged nearly 25% on Tuesday as markets reacted to a continued decline in monthly active users, cautious 2026 guidance citing “intensive competition” (which we’ll come to later), and the company’s decision to discontinue quarterly reporting of key subscriber metrics.
The company’s earnings call, led by Executive Chairman Cussion Pang, CEO Ross Liang and CFO Shirley Hu, contained a number of additional details that didn’t make it into the press release.
Here are three things that stood out.
1. TME has renewed its deal with Warner Music Group
Cussion Pang confirmed during the call that TME has renewed its contract with Warner Music Group.
The renewed deal will see the two companies explore collaboration on “physical albums, merchandise and live performances,” Pang said — a significant broadening of the partnership beyond traditional streaming licensing.
TME also renewed its deal with Bin-music and expanded its partnership with Media Asia Music, introducing Dolby Atmos to over 300 iconic tracks by legendary artists for the first time.
The Warner renewal fits a broader pattern at TME: the company is increasingly positioning itself as a full-service music platform rather than just a streaming service, investing across live concerts, artist management, and merchandise.
Pang said TME “more than doubled revenues of IP-related merchandise and fan-based consumption” across 2025 — a striking growth figure that underlines the commercial payoff of this expanded strategy.
Separately, a concrete example of TME’s expanding approach to physical formats came in Q4, when the company collaborated with Ed Sheeran to produce a KIT album for his release Play, marking TME’s “first partnership with a top-tier Western artist using this hybrid physical digital format”.
A KiT album (short for “Keep in Touch”) is a hybrid physical-digital music format popularized by K-pop. It’s essentially a small cartridge device – roughly keychain-sized — housed in a collectible box that also includes photo cards, stickers, booklets and other physical items. You tap the cartridge to your phone via NFC, which unlocks the album’s music, videos and other digital content through a dedicated app.
2. Over 10 million users are now creating music on TME’s AI platform
Ross Liang revealed that TME’s one-stop AI music production platform now has more than 10 million users and over 150,000 professional creators making music through it.
Liang described the platform as offering tools including track refinement and AI-generated vocal demos that “accelerate music creation” and lower the barrier to entry for aspiring musicians.
TME also highlighted how its QQ Music AI Agent, powered by Tencent’s AI app Yuanbao, has evolved into what the company calls a “system-level hub” — allowing users to handle complex tasks through natural-language commands. Beyond music discovery, the agent can now facilitate direct purchases of digital albums and merchandise, creating what TME described as a “seamless intent-to-action experience.”
The AI discussion continued in the Q&A, where Liang acknowledged the growing presence of AI-generated music on streaming platforms but drew a distinction between AI-produced content that gets socially shared among users and original, human-created music that continues to drive royalty revenue.
“In terms of royalty and revenue sharing, we do not see material changes,” Liang said.
Pang added that TME sees AI as “a huge opportunity” and stressed the company’s continued investment in IP creation and management, alongside AI-driven efficiency gains — while noting that offline experiences like live concerts and merchandise remain areas where AI cannot replicate the value.
Ross Liang’s answer drew an explicit parallel with user-generated video content. AI-created music, he suggested, will likely follow the UGC model seen on platforms like TikTok and Douyin — widely shared socially among familiar users, but not materially displacing original, human-created content as the driver of royalty revenue.
He acknowledged that AI is “profoundly changing” the music industry in terms of content creation and distribution, and noted that TME has seen AI-generated tracks appearing on music rankings — particularly songs that are “resung” by AI rather than originally composed by it.
“What is changing is the sound quality,” Liang said. “In the long run, [songs] really sung by AI will experience a rapid development. But in terms of the consumption of the original songs, we are not aware of big changes.”
It’s a distinction the wider industry is still grappling with — and TME’s framing of AI music as closer to social sharing than to professional content creation is a perspective worth noting.
3. TME expects “short-term pressure” on subscription revenue in 2026
Perhaps the most candid moment from the call — and one that helps explain why TME’s share price fell so sharply on Tuesday — came during the outlook discussion, when Cussion Pang acknowledged that TME’s subscription revenue will face headwinds in the year ahead.
“In 2026, our subscription revenue will experience some short-term pressure due to the intensive competition,” Pang told analysts.
He expressed confidence that the company’s three-tier membership model (ad-supported, standard, and SVIP) and its growing non-subscription services — including live concerts, artist merchandise, and advertising — would allow TME to “grow holistically and also sustainably” despite the competitive pressure.
CFO Shirley Hu reinforced the cautious tone on margins, guiding that TME’s gross profit margin in 2026 will be “flat or a little bit lower than 2025” as the company invests in live performance capabilities and IP development. She added that net profit margin would be “similar to 2025, might be a bit lower.”
Hu stressed that seasonal fluctuations in margin should be expected as TME’s revenue mix shifts, with higher-growth but initially lower-margin businesses like offline concerts and merchandise gaining share. But she maintained that in the long run, as these services scale and diversify demand, “we will keep growing our top line and… our GP margin will stay at a sound and steady level.”
Earlier this month, Macquarie downgraded TME from Outperform to Neutral, citing competitive pressure from ByteDance‘s Soda Music in particular. The threat from Soda Music and NetEase Cloud Music loomed large over the call, even as TME’s leadership expressed confidence in its long-term positioning.
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