Benchmark analyst Fawne Jiang maintained a Hold rating on Tencent Music Entertainment Group (NYSE:TME) while lowering near-term growth expectations amid rising competition, shifting consumer behavior and AI-driven industry changes.
• Tencent Music stock is trading at depressed levels. Where is TME stock headed?.
Analyst Flags Slowing Growth Trends
Jiang noted on Wednesday that Tencent Music delivered largely in-line first-quarter 2026 results, with revenue rising 7% year-over-year to 7.9 billion Chinese yuan (~ $1,163,312,920).
Online music services revenue increased 12%, supported mainly by non-subscription businesses, while subscription growth slowed to 8% from 13% in the previous quarter.
She added that non-subscription music revenue climbed 23% year over year due to strong demand for live events, merchandise, and fan-focused offerings, while social entertainment revenue fell 11%.
Adjusted profit per ADS came in at 1.46 Chinese yuan (21 cents), matching consensus estimates.
Jiang Cuts Second-Quarter Revenue Outlook
Jiang lowered the second-quarter revenue growth forecast to 4% Y/Y from 9% previously, citing mounting industry headwinds and intensifying competition.
She also reduced her subscription growth projection to 3% from 6%, saying changing consumption trends are pressuring customer conversion and retention.
While Jiang remains positive on momentum in concerts and live events, she warned that advertising demand, fan monetization, and IP-related revenue could face near-term pressure.
Jiang added that rapid AI-driven changes in content creation and distribution, along with rising piracy risks, are creating additional uncertainty for Tencent Music's revenue outlook.
Ximalaya Deal Could Support FY26 Outlook
Jiang said the pending Ximalaya acquisition could help stabilize Tencent Music's 2026 outlook after receiving conditional approval from China's SAMR regulator.
She noted that the deal could add revenue and profit contributions that offset weaker organic growth trends, particularly in subscriptions and advertising.
However, Jiang said she wants clearer visibility into deal execution, financial impact and potential synergies before becoming more constructive on the stock.
TME Price Action: Tencent Music shares were down 1.38% at $8.94 at the time of publication on Wednesday. The stock is trading near its 52-week low of $8.74, according to Benzinga Pro data.
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