To The Moon

$Tencent Music(TME)$ fiscal Q3 2025 earnings is scheduled for November 12, 2025, before the U.S. market opens.

TME Q3 2025 Earnings Analysis & Forecast

Current analyst consensus suggests a positive quarter, continuing a trend of solid financial performance driven by its core online music services.

Key Context:

Recent Momentum: TME's Q2 2025 results beat analyst expectations for both EPS and revenue, demonstrating strong growth in online music and improved operating efficiency.

Dual Engine Strategy: The company's focus remains on leveraging its "dual engine" of online music services and social entertainment services, with online music continuing to be the primary growth driver, while social entertainment faces regulatory and competitive headwinds.

TME Fiscal Q2 2025 Earnings Summary

TME reported a strong beat on both the top and bottom lines for Q2 2025, driven by the continued, successful pivot to its high-quality music subscription business.

Key Operating Highlights:

Music ARPPU Skyrocketed: Monthly Average Revenue Per Paying User (ARPPU) for online music grew to RMB 11.7, a +9.3% YoY increase (up from RMB 10.7). This was a critical metric showing successful premiumization (e.g., SVIP program).

Paying Users Increased: Online music paying users grew by 6.3% YoY to 124.4 million.

Profitability Boost: Gross Margin expanded significantly to 44.4% (up from 42.0% in Q2 2024), driven by the high-margin subscription and advertising businesses, and better cost control in the Social Entertainment segment.

Social Entertainment Decline: Revenue from the Social Entertainment Services (SES) segment declined by 8.5% YoY to RMB 1.59 Billion, continuing to be a clear drag on the overall revenue growth rate due to competition and regulatory changes.

Lessons Learned from Management Guidance and Commentary

The key lesson from the Q2 2025 results and subsequent management commentary is that TME is successfully executing a strategic shift from a high-volume/lower-margin Social Entertainment model to a high-quality/high-margin Subscription Music model.

1. The Subscription Business is the True Growth Engine (The Quality Pivot)

Lesson: TME's long-term value is now overwhelmingly tied to the Online Music Services (OMS) segment, not the historical Social Entertainment segment. The impressive ARPPU growth shows that Chinese consumers are willing to pay more for premium music content (like Hi-Fi audio and SVIP privileges).

Implication for Investors: Investors should prioritize ARPPU and Music Subscription Revenue Growth over total revenue or even total Monthly Active Users (MAUs), which is declining as TME focuses on monetizing the higher-quality users.

2. Profitability and Efficiency are the New Focus (Operational Maturity)

Lesson: The significant expansion in Gross Margin and the strong growth in Non-IFRS Net Profit (outpacing revenue growth) demonstrate a new focus on operational maturity and cost control. TME is proving it can grow profits sustainably even with regulatory headwinds and competition.

Implication for Investors: TME is now viewed less as a pure growth stock and more as a "quality earnings" story—a maturing company that is highly efficient and focused on generating substantial free cash flow.

3. Social Entertainment is a Managed Headwind, Not a Fatal Flaw

Lesson: The decline in the SES segment (live streaming, etc.) is persistent but is being effectively managed. Management commentary suggested they are optimizing this segment, reducing its revenue-sharing ratio, and are more focused on its stabilization rather than aggressive growth.

Implication for Investors: The market has largely priced in the decline of the SES segment. Any future earnings that show stabilization or a smaller-than-expected decline would be considered a positive catalyst, while continued significant declines are simply the ongoing reality of the strategic shift.

4. Innovation and Ecosystem Diversification are Key to ARPPU

Lesson: The company highlighted several initiatives beyond standard subscriptions, including advertising, offline concerts/merchandise, and AI technology (like the "Bubble" community platform and soundscape projects). These efforts are directly responsible for the increased ARPPU and Gross Margin.

Implication for Investors: Look for continued commentary on the performance of these adjacent business lines, as they are essential for monetizing the user base and differentiating TME from competitors.

Key Metrics for Investors to Watch

Investors should focus on the underlying business drivers, especially the transition towards a subscription-based music model.

1. Online Music Services (OMS) Metrics

These are the most critical metrics, as they reflect the shift to higher-quality, recurring revenue:

Music Subscription Revenue: The top priority. Continued strong double-digit year-over-year growth here would be a major positive signal.

Paying Users for Online Music (MPU): Look for consistent sequential growth in the total number of paying users. This indicates successful content and platform differentiation.

Average Revenue Per Paying User (ARPPU): An increase in ARPPU suggests successful premiumization strategies (like the SVIP tier) and enhanced user monetization. (Q2 2025 ARPPU was RMB 11.7, watch for maintenance or further growth.)

2. Social Entertainment Services (SES) Metrics

While not the primary growth engine, this segment's stabilization is important for overall revenue:

Social Entertainment Revenue: This segment, which includes online karaoke and live streaming, has been volatile due to regulatory changes and competition. Investors will look for signs of stabilization or a smaller decline than in previous quarters.

Paying Users for Social Entertainment: A rebound or slowed decline in paying users here would be a positive surprise.

3. Profitability and Efficiency

Gross Margin: An improvement in Gross Margin, primarily driven by the higher-margin music subscription business, signals greater operating leverage and a successful revenue mix shift.

Non-IFRS Net Profit: This is the headline profitability number. A significant beat here, driven by efficiency improvements, is often a strong catalyst for the stock.

Tencent Music (TME) Price Target

Based on 29 analysts from Tiger Broker offering 12 month price targets for Tencent Music Entertainment Group in the last 3 months. The average price target is $27.49 with a high forecast of $30.00 and a low forecast of $18.00. The average price target represents a 27.56% change from the last price of $21.55.

Opportunity for Trading Short-Term Post-Earnings

Trading TME post-earnings is a high-risk, high-reward proposition often centered on the following:

1. Market Reaction: Beat vs. Miss

Scenario A: Significant Beat (Bullish Signal): A strong beat, particularly on Music Subscription Revenue, MPU, and an improved Gross Margin, would likely trigger a strong, short-term upward momentum. This confirms the narrative that TME is successfully executing its high-quality growth strategy.

Scenario B: EPS/Revenue Miss or Weak Guidance (Bearish Signal): A miss, especially if accompanied by weak guidance for Q4 or an unexpected sharp drop in the Social Entertainment segment, could lead to a sell-off. The market is sensitive to any signs of weakness in the transition strategy.

Scenario C: Mixed Results: If EPS/Revenue are in line, but one of the key underlying metrics (like MPU or ARPPU) surprises, the market reaction will be tied to that specific metric, as it dictates future growth potential.

2. Short-Term Strategy Considerations

Volatility: TME's stock has shown significant volatility around earnings, indicating opportunities for pre-emptive or post-results options trading (e.g., straddles, strangles) if implied volatility is attractive.

Tencent Music Entertainment Group Sponsored ADR (TME) had 20-Day Historical Volatility (Close-to-Close) of 0.3755 for 2025-11-07.

Short Interest: Given its history, checking the short interest leading up to the report is prudent. A high short interest could magnify an upward move in the event of a strong beat (a "short squeeze").

Technical Levels: Identify key support and resistance levels before the report. A positive result might target a break above recent resistance, while a disappointing one could test key support levels.

Technical Analysis - Exponential Moving Average (EMA)

We can see that TME is experiencing a decline now, and there is a convergence of the 26-EMA and 50-EMA, while remaining in positive RSI momentum, and investors would be focused to look at these two metrics, ARPPU and MPU.

TME would need to show continued growth in the ARPPU and consistent growth in the MPU, in order to gather investors sentiment to start pushing the share price above the 50-EMA, and if that happen, we might see a reversal to the upside.

Summary

Tencent Music Entertainment (TME) is anticipated to deliver a solid fiscal Q3 2025, scheduled for November 12, 2025, before market open.

Consensus Forecast: Analysts expect Non-GAAP EPS around $0.20 and Revenue near $1.15 Billion, reflecting steady annual growth.

Key Metrics for Investors:

Music Subscription ARPPU: This is the most crucial metric. Continued growth in Average Revenue Per Paying User (ARPPU) proves the success of TME's strategy to monetize its premium subscriber base (e.g., SVIP tiers).

Online Music Paying Users (MPU): Look for consistent growth in the total number of music subscribers, validating content appeal.

Social Entertainment Stabilization: The Social Entertainment Services segment is expected to decline. A smaller-than-expected decline would be a significant positive surprise, while a sharp drop could be a major drag.

Trading Opportunity: A short-term trading opportunity exists if TME announces a strong beat, particularly on the music subscription metrics, which would likely spark an upward move due to confirmed "high-quality" earnings growth. Conversely, a miss or weak Q4 guidance could lead to a sharp sell-off.

Appreciate if you could share your thoughts in the comment section whether you think TME would be able to provide continued growth in the ARPPU and consistent growth in the MPU.

@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.