Tencent Music's Q2 revenue grows on the back of online music subscriptions
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Tencent Music Entertainment (NYSE:TME) Q2 revenue grew but the company warned of adverse impact on total revenues for the year due to certain measures being taken for the social entertainment services segment.
Total revenues in Q2 rose 5.5% year-over-year (Y/Y) to RMB7.29B ($1.01B) driven by growth of online music services, which saw revenues soar 47.6% Y/Y to RMB4.25 billion ($586M). The segment's revenue increase was steered by surge in music subscription revenues, supplemented by growth in revenues from advertising services.
Revenues from music subscriptions rose 37.2% Y/Y to RMB2.89 billion ($399M), driven by the continued uptick in the online music paying user base and ARPPU.
The number of online music paying users increased by 20.2% Y/Y to 99.4M, which drove the online music paying ratio to a record high at 16.7%, according to the company.
Tencent's Executive Chairman Cussion Pang said, "we have seen users become increasingly accustomed and willing to pay for copyrighted music, whether for songs they want to listen to or for premium listening features they enjoy. This trend is evidenced by the all-time high paying ratio and ARPPU recorded by our online music services in the reported quarter."
Revenues from Social Entertainment Services and others fell 24.6% to RMB3.04B ($419M). The decrease was mainly due to implementing several service enhancement and risk control measures aimed at offering better music-centric user experience, according to the company.
Pang noted that these measures, which were started from the latter part of Q2, are expected to put pressure on revenues from social entertainment services in H2 2023, and adversely impact total revenues for the year.
Earnings per American Depositary Shares, or ADS, rose 54.7% Y/Y to RMB0.82. In US$ earnings per ADS was $0.11. Two Class A shares equal to 1 ADS.
As of June 30, cash, cash equivalents and term deposits were RMB30.5B ($4.21B), compared to RMB28.5B as of March 31. The increase was mainly due to cash flows generated from operations.
Meanwhile, several Chinese stocks were in the red amid fears that China's faltering recovery and debt problems will spread to the global economy. A surprise rate cut by Chinese policy makers only worsened anxiety about steps to revive growth, according to a report from Bloomberg.
E-commerce giant Alibaba (BABA) was down ~2%, while online entertainment services provider Bilibili's (BILI) and electronics products provider JD.com (JD) saw its stock dip ~3%, each.

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