Tencent Music Entertainment Group (TME)

Price$8.26Cached quoteAs of 2026-09-05 19:15 UTC

AI: Undervalued

Price checkThe shares look cheap against recent earnings and the company’s large cash reserve.

First-half 2026 reported diluted earnings were $0.42 per depositary share; doubling that run rate means investors are paying about 10–11 times earnings. Adjusted first-half earnings were $0.46, implying roughly 9–10 times. Cash, deposits and short-term investments were $6.52 billion, nearly half of an approximate $13.8 billion equity value, while borrowings and notes totaled about $2.44 billion. That combination gives meaningful downside protection and supports an undervalued verdict, although acquisition integration makes simple annualization uncertain.

Big pictureProfit and cash generation strengthened sharply even while revenue growth stayed uneven.

The supplied SEC history shows revenue peaked at RMB31.24 billion in 2021, fell to RMB27.75 billion in 2023, then recovered only 2.3% in 2024. Yet operating income rose from RMB4.44 billion in 2022 to RMB8.71 billion in 2024, while gross margin climbed from about 31% to 42%. Free cash flow, meaning cash left after running and investing in the business, reached roughly RMB9.96 billion in 2024. The model has therefore become much more profitable even without smooth top-line growth.

Business strengthPaid music growth and a strong balance sheet offset shrinking casual users and acquisition dilution.

Second-quarter 2026 music-related revenue grew 11.0% and membership revenue 8.1%, while social entertainment fell 16.4%, showing the healthier music engine is replacing a shrinking legacy stream. Liquidity remained strong after Ximalaya, but the deal used up to $1.26 billion of cash plus up to 175.3 million ordinary shares, equal to about 87.6 million depositary shares. TME also repurchased 43.5 million depositary shares for $400 million and paid about $370 million in dividends, partly offsetting dilution but using substantial cash.

What could change the storyStronger Ximalaya integration could unlock upside, while weaker user reach could justify today’s discount.

The bull case strengthens if music-related revenue keeps growing around 10% or better, Ximalaya adds revenue without pulling gross margin materially below the recent 44% area, and cash generation remains strong. The bear case is visible too: online music monthly users fell 5% to 528 million in late 2025, shrinking the pool that can become paying customers. Concerts and merchandise also make quarterly growth more seasonal. Sustained low-single-digit core growth or further user erosion would make the current low earnings multiple look less exceptional.

AI: News

Second-quarter earnings resetSecond-quarter growth stayed positive, but slower profit momentum and integration costs disappointed investors.

On August 11, 2026, TME reported quarterly revenue of RMB8.93 billion, up 5.8%, with music-related revenue up 11.0% and membership revenue up 8.1%. Adjusted operating cash earnings rose 5.2%, while reported diluted earnings per depositary share edged higher year over year. The ADR closed down about 11.9% that day. The timing is consistent with concern about slower profit growth, Ximalaya costs and margin pressure, but price timing alone does not prove causation.

Ximalaya acquisition closesThe Ximalaya purchase broadened TME’s audio reach but consumed cash and introduced meaningful share dilution.

TME completed the Ximalaya acquisition on May 18, 2026. The consideration included up to $1.26 billion in cash and up to 175.3 million TME ordinary shares, and Ximalaya became wholly owned. In the second quarter, Ximalaya contributed RMB407 million of revenue after consolidation. The strategic upside is a larger audio catalog and more membership opportunities; the offset is higher borrowing, acquisition amortization and potential dilution, so future value depends on whether added profit eventually exceeds those costs.

User decline shocks sharesStrong 2025 growth was overshadowed by a shrinking free-user base, prompting a sharp reassessment.

On March 17, 2026, TME reported full-year revenue growth of 15.8% and music-service revenue growth of 22.9%. Fourth-quarter paying users rose 5.3% to 127.4 million and monthly revenue per payer rose 7.2%, but online music monthly users fell 5.0% to 528 million. The ADR fell about 25% that day in market reporting. That reaction appears tied to concern that a smaller free audience could eventually limit subscriber conversion, although one day’s price move cannot establish causation by itself.

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Financial statements

	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016
Revenue	¥32.90B	¥28.40B	¥27.75B	¥28.34B	¥31.24B	¥29.15B	¥25.43B	¥18.98B	¥10.98B	¥4.36B
Gross profit	¥14.54B	¥12.03B	¥9.79B	¥8.77B	¥9.40B	¥9.30B	¥8.67B	¥7.28B	¥3.81B	¥1.23B
Gross margin	44.18%	42.34%	35.29%	30.96%	30.10%	31.91%	34.10%	38.33%	34.70%	28.25%
Research & development	¥2.32B	¥2.28B	¥2.52B	¥2.58B	¥2.34B	¥1.67B	¥1.16B	¥937.0M	¥797.0M	¥449.0M
Operating expenses	¥4.80B	¥4.68B	¥5.02B	¥5.56B	¥6.69B	¥5.58B	¥4.74B	¥3.97B	¥2.43B	¥1.15B
Operating income	¥9.74B	¥8.71B	¥6.06B	¥4.44B	¥3.80B	¥4.71B	¥4.62B	¥2.04B	¥1.59B	¥103.0M
Operating margin	29.59%	30.67%	21.83%	15.68%	12.16%	16.16%	18.17%	10.74%	14.51%	2.36%
EBITDA	¥14.77B	¥9.69B	¥7.06B	¥5.60B	¥4.80B	¥5.53B	¥5.21B	¥2.41B	¥1.97B	¥339.0M
EBITDA margin	44.90%	34.11%	25.45%	19.77%	15.37%	18.98%	20.46%	12.68%	17.96%	7.77%
Net income	¥11.06B	¥7.11B	¥5.22B	¥3.84B	¥3.21B	¥4.18B	¥3.98B	¥1.83B	¥1.32B	¥85.0M
Net profit margin	33.60%	25.03%	18.81%	13.55%	10.29%	14.32%	15.64%	9.65%	12.01%	1.95%
Basic EPSper basic share	CN¥7.20	CN¥4.30	CN¥3.16	CN¥2.30	—	—	—	—	—	—
Diluted EPSper diluted share	CN¥7.12	CN¥4.24	CN¥3.10	CN¥2.28	—	—	—	—	—	—

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Owners

Reported shareholders

Reference date Jun 30, 2026

Reported holdings Number of shares

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Top 20 reported holders of TME
Holder	Shares held
SCHRODER INVESTMENT MANAGEMENT GROUP	45.63M
BlackRock, Inc.	32.78M
Invesco Ltd.	29.28M
Krane Funds Advisors LLC	22.54M
Overlook Investments LP	19.01M
ARGA Investment Management, LP	18.19M
VANGUARD CAPITAL MANAGEMENT LLC	16.08M
JPMORGAN CHASE & CO	12.46M
MORGAN STANLEY	11.18M
D. E. Shaw & Co., Inc.	10.33M
STATE STREET CORP	9.34M
BAILLIE GIFFORD & CO	8.63M
VOLORIDGE INVESTMENT MANAGEMENT, LLC	7.33M
Himalaya Capital Management LLC	6.59M
RENAISSANCE TECHNOLOGIES LLC	6.46M
Mawer Investment Management Ltd.	6.2M
MARSHALL WACE, LLP	6.04M
GEODE CAPITAL MANAGEMENT, LLC	5.99M
NORGES BANK	5.84M
BNP PARIBAS FINANCIAL MARKETS	5.57M

Bars compare reported share counts. A matching total for this share class and reporting period is unavailable, so percentages are not shown.

Source: SEC Form 13F ↗Updated Sep 29, 2026 · Quarterly data

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Jul 1, 2024–Jun 30, 2026

Buys0$0.00 disclosed value

Sells (SEC code S)0$0.00 disclosed value

No insider transactions transactions were reported in the stored SEC coverage.

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Tencent Music Entertainment Group (TME)

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