Goldman Sachs – Tencent Music (TME.US): 2Q26 Results In Line; Near-Term Subscription Pressure but Content Ecosystem Transition Continues; Buy Rating Maintained (Aug 12, 2026)
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Key Views
Live concerts and artist merchandise revenue grew 70–80% YoY in 2Q26, after 100%+ in 1Q26; TME holds only a single-digit percentage share of China's live music market, leaving room to gain. Competition is intensifying: Douyin is diverting traffic, and Soda Music's AI-generated content is attracting casual users—its DAU reached 60 million in June 2026, overtaking QQ Music in April, while MAU of 167 million surpassed NetEase Cloud Music in February. Deepening integration with WeChat Channels should ease traffic pressure.
Outlook
2H26 subscription and advertising growth may slow on competition, partly offset by non-subscription businesses. Ximalaya integration lifts expenses near term but should bring cost efficiencies and synergies. TME bought back ~US$400 million in 2Q26; at ~10x 2026E P/E, buybacks plus dividends imply total shareholder returns near 10%, providing downside support.
Recommended Securities
- TME ADR: Buy, 12-month target US$11.70 (current US$9.90), upside 18.2%
- 1698.HK: Buy, 12-month target HK$46.00 (current HK$38.56), upside 19.3%