To The Moon

$Tencent Music(TME)$ is scheduled to release its Q2 2025 financial results on Tuesday, August 12, 2025, before the U.S. market opens. As a leading online music and audio entertainment platform in China, the report will be closely watched by investors.

Analyst Estimates: The consensus forecast for Q2 2025 is an EPS of approximately $0.19 to $0.20 per share and revenue around RMB 7.97 billion. A beat or miss on these expectations will likely drive the initial market reaction.

Tencent Music Entertainment (TME) Fiscal Q1 2025 Earnings Summary

Tencent Music Entertainment (TME) reported a strong fiscal Q1 2025, demonstrating the success of its strategy to focus on its core music subscription services. The company's earnings more than doubled year-over-year, and revenue saw a healthy 8.7% increase, primarily driven by its online music services.

Key highlights of the Q1 2025 report included:

Strong Online Music Growth: Revenues from online music services grew by 15.9% year-over-year. This was fueled by a 16.6% increase in music subscription revenues. The number of paying users reached 122.9 million, while the monthly average revenue per paying user (ARPPU) also saw a significant boost.

Social Entertainment Decline: The social entertainment segment continued to be a drag on overall performance, with a revenue decrease of 11.9%. This was attributed to adjustments in live-streaming interactive functions and more stringent compliance procedures.

Impressive Profitability: The company's net income more than doubled year-over-year, partly due to a one-time gain on a deemed disposal of an investment. Non-IFRS net profit also saw a robust 24.6% increase, indicating improved operational efficiency and cost management.

Lessons Learned from the Q1 2025 Guidance

While TME did not provide explicit quantitative guidance for Q2 2025, the commentary from management and the trends highlighted in the Q1 report offer several important lessons for investors:

Subscription is the Core Growth Engine: The strong performance of music subscriptions and ARPPU is the most critical takeaway. This segment is where TME's future value lies. The company's focus on expanding its SVIP membership program and offering exclusive content and perks has proven successful in driving user engagement and monetization. The lesson is that TME's success is increasingly dependent on its ability to grow and retain its paying user base, making this the key metric to watch in future reports.

Social Entertainment is a Headwind, Not a Dealbreaker: The continued decline in social entertainment revenue is a clear challenge for TME. However, the company's ability to offset this weakness with strength in its music services shows that the platform is not solely reliant on its live-streaming and karaoke businesses. The lesson here is to view the social entertainment segment as a headwind that the company is actively managing, rather than a fundamental flaw in its business model. Any signs of stabilization or a smaller decline would be a positive signal.

Efficiency and Profitability Matter: TME's improved gross margin and non-IFRS net profit growth demonstrate that the company is effectively managing its content costs and operational expenses. The guidance and commentary suggest a continued focus on this, reinforcing the lesson that TME is not just a growth story but also a story of a maturing company focused on sustainable profitability. This focus on efficiency provides a buffer against the challenges in the social entertainment segment and supports the long-term investment case.

Key Metrics for Investors to Watch

Investors should look beyond the top-line revenue and EPS figures to understand the company's underlying performance. The key metrics to watch will be:

Music Subscription Revenue and User Growth: This is the most crucial growth driver for TME. Investors will be keen to see if the company can continue to increase its paying user base for its music streaming services and improve the average revenue per paying user (ARPPU). In Q1 2025, music paying users grew to 122.9 million, and monthly ARPPU increased to RMB 11.4. The Q2 report will reveal if this positive trend continues.

Social Entertainment Performance: The company's social entertainment segment, which includes live streaming and karaoke, has been a headwind in recent quarters. Investors will be looking for signs of stabilization or a turnaround in this segment. Updates on new initiatives or a deceleration in the revenue decline would be viewed positively.

Operational Efficiency and Profit Margins: TME has been focused on improving its profitability through cost control and optimizing its content costs. An increase in gross margin and net profit margin will be a strong indicator of the company's operational effectiveness.

Tencent Music Entertainment (TME) Price Target

Based on 28 analysts from Tiger Brokers offering 12 month price targets for Tencent Music Entertainment Group in the last 3 months. The average price target is $19.27 with a high forecast of $26.20 and a low forecast of $12.00. The average price target represents a -12.92% change from the last price of $22.13.

Short-Term Trading Opportunities Post-Earnings

TME's stock has shown significant volatility around its earnings reports in the past. The Q1 2025 report saw the stock gain a modest 2.5% the following day, but a previous report saw a substantial gain of over 15%. This suggests that the earnings release could present short-term trading opportunities.

Bullish Scenario: A strong report with better-than-expected growth in music subscriptions, a smaller-than-expected decline in social entertainment, or a significant beat on EPS and revenue estimates could lead to a positive market reaction. New strategic partnerships or a bullish outlook for the remainder of the year could also fuel a rally. Traders may consider a long position in anticipation of a positive surprise.

Bearish Scenario: A miss on key metrics, particularly a slowdown in music subscription growth or a continued sharp decline in social entertainment, could trigger a sell-off. Any concerns raised about increased competition or regulatory hurdles in China would also weigh on investor sentiment. This could present an opportunity for a short position.

Given the potential for high volatility, options trading strategies like straddles or strangles could be considered, although this comes with the risk of a "volatility crush." For stock traders, the key will be to closely monitor the release and the market's immediate reaction to make an informed decision.

The historical win rate is not so great for Long Straddle but considered one of the better one if you are considering to take advantage if TME can trigger a rally with an earnings beat.

Technical Analysis - Exponential Moving Average (EMA)

We can see that TME are having a positive momentum and the bulls are in control, the bulls might continue to make a daily uptrend continuation, but if the music subscription revenue do fall then we might see some investors going for selling off.

As of now, investor sentiment looks to be on the positive side, and we hope to see a price surge after its earnings release.

Summary

Tencent Music Entertainment (TME) is set to report its Q2 2025 earnings on Tuesday, August 12, 2025. Investors should closely monitor the growth in music subscription revenue and the number of paying users, as this is the company's primary growth driver.

The performance of the social entertainment segment will also be a key focus, as it has been a headwind. Analysts expect an EPS of around $0.19 to $0.20 per share. A positive surprise in music subscriptions or a smaller-than-expected decline in social entertainment could lead to a short-term rally for the stock.

Appreciate if you could share your thoughts in the comment section whether you think TME could provide an earnings beat with positive music subscriptions, which could help to trigger a rally.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.