SHENZHEN - Tencent (HK:0700) Music Entertainment Group (NYSE:TME) reported second quarter earnings that fell short of analyst expectations, sending shares down 6.4% in premarket trading on Tuesday.
The Chinese music streaming giant posted adjusted earnings per American Depositary Share (ADS) of RMB1.07 ($0.15), missing the analyst consensus of RMB1.10. Revenue came in slightly above estimates at RMB7.16 billion ($985 million), compared to expectations of RMB7.15 billion.
While total revenue declined 1.7% year-over-year, online music services revenue surged 27.7% to RMB5.42 billion ($746 million). This was driven by a 29.4% jump in music subscription revenue to RMB3.74 billion ($515 million). The number of paying users for online music increased 17.7% to 117.0 million.
However, social entertainment services and other revenues plunged 42.8% to RMB1.74 billion ($239 million). The company attributed this to adjustments to certain live-streaming features and stricter compliance procedures implemented last year.
"We are pleased to report another quarter of robust results, driven by the strong performance of our online music services," said Cussion Pang, Executive Chairman of TME. "With over 10 million net subscriber additions in the first half of 2024 and ARPPU expansion, we continue to break new grounds within China's streaming landscape."
Despite the earnings miss, Tencent Music's gross margin expanded to 42.0% from 34.3% a year ago, thanks to strong growth in higher-margin music subscriptions and advertising services.
The company ended the quarter with RMB35.03 billion ($4.82 billion) in cash and short-term investments.
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