The acquisition of Ximalaya has been settled, but Tencent Music still faces growth pressure.
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Author | Huang Yu
After nearly a year, on May 12, Tencent Music's acquisition of shares in Ximalaya was finally approved by the State Administration for Market Regulation. As a result of this news, Tencent Music's US-listed shares jumped more than 10% in pre-market trading.
As a giant in China's online music industry, Tencent Music is actively strengthening its all-scenario audio moat, which is its way of breaking through the ceiling of user growth and increasingly intense competition for stock users.
On May 12, Tencent Music released its Q1 2026 report showing total revenue of 7.9 billion yuan for the quarter, up 7.3% year-on-year, but the growth rate slowed from Q4 2025.
According to International Financial Reporting Standards (IFRS), Tencent Music’s net profit attributable to shareholders fell 51.3% year-on-year to 2.09 billion yuan, mainly because in the same period in 2025 there was a one-off gain of 2.37 billion yuan from deemed disposal of investments in associates.
After removing the relevant impact, the non-IFRS net profit attributable to shareholders, which better reflects the performance of the main business, grew 7% year-on-year to 2.27 billion yuan.
Compared to single quarter profit figures, the market is now more concerned about: with traffic peaking and short video platforms continuing to divert user time, what is the future growth space for Tencent Music?
A pain point that Tencent Music currently faces is the shrinking monthly active users of online music services. In Q4 2025, monthly active users (MAU) of Tencent Music’s online music services was 528 million, down 5% from 556 million in Q4 2024.
Perhaps to downplay the "user scale" narrative, Tencent Music did not disclose the latest MAU data in the Q1 2026 financial report, hoping investors would focus more on the membership revenue that has been emphasized in recent years.
The report shows that in the first quarter, music-related membership revenue grew 6.6% year-on-year to 4.57 billion yuan, with a noticeably slowed growth rate.
In recent years, platforms like Douyin, Kuaishou, and Qishui Music have continued to encroach on user time, with music content increasingly embedded in short videos, live streams, and social content streams, rather than standalone music apps.
Guoyuan International analyst Li Chengru believes that competition in the online music market faced by Tencent Music has intensified. In addition to the competition for user time and bottlenecks in user growth, competitors' free music strategies have impacted price-sensitive users and slowed the company’s pay conversion process.
Against this backdrop, it is difficult for Tencent Music to return to the era of rapid expansion based on user scale.
Tencent Music needs to explore more diversified business models, which is also reflected in the financial report. The data shows that in the first quarter, revenue from music-related non-member services grew 28% year-on-year to 1.94 billion yuan.
This means that what Tencent Music truly wants to strengthen now is not just "music subscription," but richer consumption scenarios built around music IP.
From the perspective of the capital market, Tencent Music is also undergoing a valuation logic shift.
It no longer relies on rapid user growth like an internet platform, but increasingly resembles an online entertainment consumption company with stable cash flow.
The question is, after China’s online music industry enters the stock era, can Tencent Music continue to create new consumption scenarios?
This will determine whether it ultimately becomes a high-dividend value stock, or whether it can still retain the valuation imagination of a growth company.
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