Core Viewpoint - The company reported strong Q3 2025 results, exceeding Bloomberg expectations with significant revenue and profit growth driven by online music subscription services and non-subscription revenue streams [1][2]. Financial Performance - Q3 2025 revenue reached 8.46 billion yuan, a year-over-year increase of 20.6% and a quarter-over-quarter increase of 0.2% [1] - Net profit attributable to shareholders was 2.15 billion yuan, up 36% year-over-year but down 11% quarter-over-quarter [1] - Non-GAAP net profit stood at 2.48 billion yuan, reflecting a year-over-year increase of 28% and a quarter-over-quarter decrease of 6% [1] - Operating costs increased by 18.8% year-over-year, primarily due to rising costs in offline performances, IP-related expenses, and advertising agency fees [1] - Gross margin was 43.5%, showing a year-over-year increase of 0.9 percentage points but a quarter-over-quarter decrease of 0.9 percentage points [1] Business Segmentation - Online music service revenue was 6.97 billion yuan, a year-over-year increase of 27.2% and a quarter-over-quarter increase of 1.7% [2] - Subscription revenue within online music was 4.50 billion yuan, up 17.2% year-over-year and 2.7% quarter-over-quarter, driven by an increase in ARPPU [2] - Non-subscription revenue surged to 2.47 billion yuan, a year-over-year increase of 50.6% [2] User Metrics - The online music monthly active users (MAU) reached 551 million, a year-over-year decrease of 4% [2] - The number of paying users increased to 126 million, a year-over-year increase of 6% and a quarter-over-quarter increase of 1% [2] - The paying rate was 22.8%, up 2.2 percentage points year-over-year [2] Strategic Initiatives - The company is expanding its artist matrix by closely collaborating with K-POP and introducing 15 Chinese label artists [3] - A strategic partnership with Weverse, a well-known overseas fan service platform, will enhance user engagement on QQ Music [3] Profit Forecast - Revenue projections for 2025-2027 are 32.979 billion yuan, 36.856 billion yuan, and 40.732 billion yuan respectively, with net profits expected to be 11.127 billion yuan, 9.837 billion yuan, and 11.156 billion yuan [3] - The company maintains a "buy" rating based on the anticipated growth in online music paid users and ARPPU, alongside strong performance in non-subscription revenue [3]

Investment Rating - The report maintains a "Buy" rating for Tencent Music-SW (01698) [1] Core Insights - The increase in ARPPU has driven subscription revenue growth, while non-subscription business has achieved breakthroughs [2][6] - For Q3 2025, the company reported revenue of 8.46 billion yuan, a year-over-year increase of 20.6%, and a net profit attributable to shareholders of 2.15 billion yuan, up 36% year-over-year [6][11] Financial Performance - Q3 2025 revenue of 8.46 billion yuan, with a year-over-year growth of 20.6% and a quarter-over-quarter growth of 0.2% [6] - Net profit attributable to shareholders reached 2.15 billion yuan, reflecting a year-over-year increase of 36% [6] - Non-GAAP net profit was 2.48 billion yuan, up 28% year-over-year [6] - Operating costs increased by 18.8% year-over-year, primarily due to rising costs in offline performances, IP-related expenses, and advertising agency fees [6] - Gross margin stood at 43.5%, with a year-over-year increase of 0.9 percentage points [6] Business Segmentation - Online music service revenue for Q3 2025 was 6.97 billion yuan, a year-over-year increase of 27.2% [7] - Subscription revenue within online music reached 4.5 billion yuan, up 17.2% year-over-year [7] - Non-subscription revenue surged to 2.47 billion yuan, a year-over-year increase of 50.6% [7] User Metrics - The number of paid users reached 126 million, a year-over-year increase of 6% [7] - The ARPPU for Q3 2025 was 11.9 yuan, reflecting a year-over-year increase of 10% [7] Future Projections - Revenue forecasts for 2025-2027 are 32.98 billion yuan, 36.86 billion yuan, and 40.73 billion yuan respectively [11] - Projected net profit for the same period is 11.13 billion yuan, 9.84 billion yuan, and 11.16 billion yuan respectively [11] - The report anticipates continued growth driven by an increase in paid users and ARPPU, alongside strong performance in non-subscription business [11]

Core Insights - Tencent Music Entertainment Group reported its unaudited financial results for the second quarter ending June 30, 2025, with total revenue of 8.44 billion yuan, representing a year-over-year increase of 17.9% [1] - The adjusted net profit for the quarter was 2.64 billion yuan, showing a year-over-year growth of 33.0% [1] Revenue Breakdown - Online music service revenue increased by 26.4% year-over-year to 6.85 billion yuan [1] - The number of online music paying users grew by 6.3% year-over-year to 124.4 million [1] - Average revenue per paying user per month rose from 10.7 yuan in the same period of 2024 to 11.7 yuan [1]