Tencent Music Entertainment Group

We'll be right back. Why can't I believe that you're in my dreams? I'm sorry that I lost you You used to look up to the mountains for me But I always made you blush But now I can't believe it We may not meet again People come and look at their old memories. Why do they wake up and go to their dreams? Why do they wake up and stay in their dreams? The nine windows in the sky are like the nine windows. The snow falls on the bottom of my heart. One thousand, one hundred, zero, one time in my eyes. Your outline is like a dream. If I remember it clearly, there is a shadow. When I wake up, that person is you. Every time I run towards you from my dream. I put the ending in your arms. I haven't seen you for a long time, where have you been? I've left a lot of memories for you I'm sorry that I lost you You once turned your eyes for me And I always made you blush Thank you. Thank you.

Good evening, good morning, and welcome to Tencent News Entertainment's fourth quarter and four-year 2025 earnings conference call. I'm Nolte, and you have a high hour. We announced our financial results earlier today before the U.S. market opened. The earnings release is now available on our website and by the newswire services. During today's call, you'll hear from Mr. Kashin Pong, our executive chairman, and Mr. Ross Leung, our CEO, who will share an overview of our company's strategies and business outputs. Then Ms. Shirley Wu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the same privacy note in our end. Please note that we're discussing non-IFRS measures today, which are authorities going to reconcile to the most comparable measures reported under IFRS and that is reducing violence with the SEC. All participants are muted at this time. After management's remarks, there will be a cleaning session, and please be advised that today's call will be recorded. With that, I'll now turn the call over to Tushin, Executive Chairman of TNU. Tushin, please.

Thank you, Madison. Hello, everyone, and thank you for joining our call today. In 2025, we remain disciplined in executing our dual-engine content and platform strategy, delivering accelerated revenue growth and sustained margin expansion. Our differentiated all-in-one music service platform has fueled solid subscription growth and strong momentum across our non-subscription offerings. This enabled us to unlock crypto value from music IPs, create new opportunities for artists, and address a larger market. As a competitive landscape continues to evolve, our proven ability to deliver integrated, expensive, and multifaceted services give us a distinct competitive advantage. With disciplined investment and continued innovation focused on long-term value creation, we are confident in leading the industry advancement. Our competitive edge first and foremost stems from our industry leading music copyright portfolio. Building on our all high quality IP access, we have expanded a comprehensive suite of music services to create a holistic value for music creators and contribute to the long-term growth of music industry. Leveraging our deep insights into the industry, we have amplified our content strength and addressed the evolving listening preferences of our users. First, our timeless and classic music catalog foster deep emotional connections and serve as a cornerstone of our subscription business. This is why music can be so long lasting and enduring in terms of monetization. Pushing forward from a position of strength, he recently renewed the contract with Warner Music Group and Bean Music, exploring new avenues for physical albums, merchandise, and live performances. He also deepened the alliance with Media Asia Music, introducing Dolby Atmos to over 300 iconic tracks by legendary artists including Eason Chan, Ken Yixin, Leslie Zhang, Zhang Guorong, and Andy Lau, Liu Dehua. For the first time, elevating the value of our classics with a more immersive listening experience. Second, we continue to deepen differentiations through our proprietary content. The streaming share of our self-produced content keeps growing as listeners seek unique high-quality genres and musical experience. For example, our mid-autumn themed hit, Year After Year, Shui Shui Nian Nian, performed by Shao Zhan, charted in 17 countries and regions and generated over 100 million social media views in a single day. Furthermore, our capability to craft hits OSTs continues to strengthen. In the fourth quarter, we produced a bespoke 14-track OST suite for Tencent Video's hit drama, Shine On Me, which topped multiple music charts during the drama's broadcast. In addition, several of our co-producer songs were featured on the 2026 CMG Spring Festival Gala, which then quickly went viral with multiple tracks surprising 10 million streams in just a few days. Third, we continue to gain share among younger users, thanks to our coverage of genres that resonate well with these user cohorts. K-pop, for instance, is capturing and increasing shares of streams. Our recently renewed partnership with P Nation Corporation secured a 30-day Head Start benefit to new releases from top Korean artists and groups, such as Psy, Crush, Hwasa, Baby Don't Cry, and TNX. Keeping users at the forefront of global trends, our thriving Tencent Musician platform and established avenue for indie and up-and-coming artists is also vital to meeting the growing appendage of young audiences. for diverse music styles. This quarter, we partnered with the indie band Fine, a music group with over a million followers. Their tracks, including the viral Kid's Breathing Decision, Hu Xi Jue Ding, sparked an enthusiastic community interaction among young users. Years of dedication efforts and our distinctive competitive edge within the content and platform ecosystem have enabled us to accelerate the comprehensive expansion of our music services. We believe this is quite unique to TME, enabling us to continue leading music consumption along the entire music industry chain. Beyond music subscription, we see tremendous potential in other music related value added services. We aim to grow and expand our total adjustable market sustainably, guarded by our deeply rooted and strong conviction in serving, protecting, and unlocking the full value of music IPs. Building on our momentum, we continue to push boundaries by hosting more high-quality live experiences that empower artists in expanding their audience reach. First, let me begin by highlighting that in 2025, we showcased our production capabilities with multiple flagship events, including G-Dragon's Chen Zhilong World Tour. The 20 concert tour across eight cities in Asia Pacific attracted over 260,000 fans. This highly sought after tour featured two landmark shows at the Taipei Dome in the fourth quarter, drawing over 75,000 fans. the largest scale events that we have hosted for him. This unprecedented success proved our ability to execute compact, high-profile tools and laid a solid foundation for future collaborations with top-tier international artists. Secondly, through continuous investment across the music value chain, we have built a diverse and robust lineup of strategic artists. We collaborate with them across music promotion, live performances, artist management, and merchandise. And these investments have begun to bear fruit. Contributing to strong growth in our non-subscription revenue in 2025, our strategic artist portfolio include Hai Lai Amu, Will Peng, Pan Wei Bo, Fiona Seed, She Kai Qi, Silence Wang, Wang Sulong, Kim Ji Woo, Wu Kequn, Tia Wei, Yuan Yaowei, Jane Zhang, Zhang Liangning, Angela Zhang, Zhang Shaohan, Zhang Yuan, and Guy Zhouyan. Through these efforts, we offer fans a richer array of music consumption and well-rounded entertainment experiences, while transforming music and artists into influential IPs, further extending their value and impact. Third, beyond live concerts, we continue to introduce innovative merchandise formats to spark new waves of fan-based consumption. A prime example was the Kid album for Ed Sheeran's latest release. Play, marking our first partnership with a top tier Western artist using this hybrid physical digital format. We also enhanced Esther Yu, Yu Shuxin's physical album, Spicy Honey, with a suite of collectible elements, pushing fans and they engaging engagement. In addition, we make a breakthrough in expanding artists' merchandise with new tour-themed collectibles, which are highly valued by fans as tangible extensions of the live concert's experience and emotional connections with their favorite artists. Our exclusive edition, Lei Zhang's, Zhang Yixing's, Grand Night Boundless, two special commemorative gift box, and a special release of Luhan's Erlin Erwu, Luhan's season four Asia tour commemorative album, integrated with SVIP privileges, both achieved strong sales across the board. I'm pleased to say that we more than double revenues of IP related merchandise and fan basic consumption as we exceeded 2025. As advertising and other IP-related offerings scale, and as we offer multi-tiered membership for online music subscription, the business impact of each paid membership varies. Given the significant evolution of our business model in recent years, our focus has moved beyond the number of paid subscribers and ARPPU. The operating matrix for our online music services adopted at our listing, instead, we are increasingly focused on revenue and profits as our primary performance indicators. Reflecting this shift, starting from the next quarter, we will continue to disclose the certain operating matrix on a quarterly basis. Going forward, we will report annually the number of total paying users across our music services as of year end. Last but not least, with social responsibilities and backed in our core strategy, we continue to improve accessibility and inclusive design, making our products more user-friendly. For example, QQ Music introduced a hearing protection mode for children, leveraging AI and user insights to reduce sharp and sensitive sounds for a safer and more comfortable listening experience. Meanwhile, WeSing upgraded its large front mode to better serve more users, with adoption exceeding 50%. To wrap up, our thriving dual-engine ecosystem, anchoring by content advantage, comprehensive service offerings, and innovative excellence, enable us to effectively serve a diverse range of user creators and friends while unlocking the IP value and enhancing monetization efficiencies. Looking ahead, we will continue to reinforce our core strength and broaden our reach to capture the significant growth opportunities before us. Now, I would like to hand the call over to Ross for a deeper dive into our overall platform development. Ross, please go ahead. Thank you. Thank you, Ka-hsuan.

Hello, everyone. In an era of rapid technological advancement and an evolving consumption expectations, apart from what Ka-hsuan just discussed, We stayed nimble, acting proactively across the board to serve our users better and keep the flavor of our content platform rolling. With our deeper commitment to user value, we have built a comprehensive, multi-pronged membership system designed to drive effective subscriber conversion, stronger engagement, and a deeper share of wallets. We continue to lead music consumption trends through ongoing technological and product innovation, inspiring users to explore a broader range of music genres and discover artists driven by differentiated expensive content privileges as well as immersive experiences. We ended 2025 with our 20 million SVIP users with ARPPU trending standing upward. Our new AD-supported subscription plan is also gaining initial traction. Over time, it will allow us to broaden user access and attract new audiences to our platform. We continue to innovate product metrics to deliver highly differentiated offerings that make music consumption seamless and accessible anytime and anywhere. First, we further deepen and integrate our presence across marketing devices. While mobile apps remain our core access point, we have also penetrated further into PC, in-car, smart speaker, and available ecosystems. This makes music consumption an integral part of users' daily lives, whether they are commuting and at home or at work. Second, our multi-platform portfolio enables us to cater to a wide range of user habits, and preferences, while Google Music and QQ Music offer comprehensive, premium services to highly-engaged users with a strong willingness to pay. Light versions such as audio music and the Google concept serve casual listeners effectively. Third, we are integrating social features to amplify user switch and both user acquisition, conversation, and engagement. In quarter four, QQ Music introduced Mayworth DM, onboarding 170 artists from Hive and other labels to broaden artist-fan interaction channels. Bubble upgraded its functionality with an intelligent song recognition feature that automatically detects song titles, screenshots, or links shared by artists and enables one-time playback. Together with a launch of live streaming for domestic artists, this enhancement drawn higher user time spent and the rotation. It's also worthwhile to mention that this year's A New Music Report campaign added handwriting letters and AI-generated voice messengers from artists, further strengthening users' engagement and encouraging widespread sharing. As over-expanding user cases result in broadened audience reach, We remain focused on harnessing AI to import music creation and elevate user experiences. From music creation and production to distribution and consumption, we are making music consumption more fun and personalized. First, our AI tools are interested in reaching content supply. Today, over 10 million users and more than 150,000 professional creators use our one-stop AI music production platform. Features such as track refinement and AI-generated vocal demos accelerate music creation. In addition, AI auto-captured chorals, highlights, and generated video clips based on lyrics, delivering more engaging audio-video experiences through quick listen mode. Second, we are deepening cooperation across the broader Tencent ecosystem to enhance content distribution and consumption. may enhance our self-development multimodal large model, during our recommendation-driven stream share to a record high. May also deepen collaboration with video accounts by co-creating trending music charts and adding BGM music links in the comment section for the joint promotion of hit songs. Meanwhile, Yuanbao has also been embedded into QQ Music. This has not only boosted user engagement, but also provided deep insight into our user preferences and needs, thereby improving distribution efficiency. So, we have integrated AI across the end-to-end music consumption journey. Ported by Yuanbao, QQ Music's AI agent has evolved into a system-level hub, allowing users to handle complex multi-step tasks using natural language commands. For example, beyond music discovery, the AI agent provides direct access to digital albums and merchandise purchase. creating a seamless intent-to-action experience that driven conversion. Last but not least, we continue to scale and differentiate our SVIP membership, capturing new audience segments and leveraging our uniquely comprehensive ecosystem to deepen music consumption and unlock substantial monetization opportunities. particularly through our growing fund-based economy. As we constantly deepen collaboration with music labels, artists introduce new high-value benefits. Our SYP users surpassed the 20 million milestone, confirming the success of our strategy. Our further enriched membership benefits fulfill the diverse needs of a broadened user base during both SVIP sign-ups and the rotation. For example, the appointment of Ruan Ding, Ding Yuxi, Ju Jingyi, and Carrie Wang, Wang Junkai, as QQ Music SVIP brand ambassadors, and Liu Yuning as Kugel's Music first-ever brand ambassador, Piled with limited addition physical and virtual gifts hosted the SYP subscription. The prioritized SYP ticket package for the annual gala of Melody Journey 2 and QQ Music Top Music Night 2026 also result in effective SYP adoption. We also grow off Starlight card roster to include career artists like Ivy and Nmix, enriching the card pool and attracting fan participation. At the same time, feature-related perks continue to drive SVIP acquisition and rotation. Highlights include QQ Music co-branded DTS-X and the proprietary NAC sound formats. Google Music's scenario-specific DTS sound effects and the festival and the co-branding scheme with renowned artists like Eason Chung, Chen Yixun, Silence Wang, Wang Sulong, and Zhou Shen. All of this added to a more immersive listening experience and a deeper fan engagement. To summarize, our commitment to product excellence, innovation, and value creation has propelled resilient growth in a dynamic and competitive market environment. Looking ahead, we remain dedicated to this long-term, user-centric approach, sitting at the forefront to capture new growth in the sustainable music ecosystem. With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

Thank you, Lars, and greetings, everyone. Let me launch into our financial results. We closed the 2025 with outstanding financial performance in both top line and bottom line. We achieved a robust growth in musical subscription, advertising, offline performance, and artist-related merchandise sales, and successfully implemented our ROI-focused approach for promotional expenses. I'll first talk about Q4 2025 performance. In Q4 2025, our total revenues grew 15% year-on-year to only 8.6 billion, driven by strong growth in online music services. Music subscription revenues continued to grow its momentum up by 13% year-on-year and reached up to 4.6 billion in June 4, 2025. Revenues from milk surveys other than milk subscription were up by 2.5 billion, up by 41% year-on-year. For milk subscription revenues, as was discussed earlier, we have built a multi-pronged membership system that includes AD-supported membership, standard membership, and SYP to serve users with different needs and preferences. This system has been well received and has successfully led to increased user retention and growth in musical subscription revenues. We continuously enrich privileges and benefits and provide limited time and opportunities for our SRIP members. In Q4, we appointed Bill Yilin as Kugel Musical's first ever Brown Ambassador. Together with limited additional physical and visual skills, In addition, we offered a priority ticketing for the Newer Melody Journal 2 gala entrance tickets for our SYIP members. Advertising revenue continued its strong growth strategically, both year-on-year and sequentially, primarily driven by the following. First, our AD-supported model continued its robust growth as a result of increased number of advertisers. higher entrance rates, and higher ECPM. Double 11 shopping festival also contributed to the sequential revenue growth. Second, sponsorship advertising achieved strong growth. Offline performance and the music festivals have broadened our user scenario and effectively attracted more brands, thereby driving growth in sponsorship advertising revenues. Over the past few quarters, our offline performances and artist-related merchandise sales have made significant progress and even increased results. In Q4, we hosted two grand shows in Taipei for G-Dragon and provided artist-related merchandise sales during the show, which were exceptionally well received. We also collaborated with to deliver a series of successful concepts, providing fans with distinctive experience. Meanwhile, we have established the cooperation with strategical artists across musical promotion, offline performances, and artist-related merchandise to provide a more immersed experience for fans and help enrich privileges of SYK membership. Revenues from social entertainment service and others were 1.5 billion, down by 5% year on year. Our gross margin in Q4, 2025 was 44.7%, up by 1.1 percentage points year on year, which was mainly attributable to strong growth in subscription and advertising revenues, alongside a lower revenue sharing ratio in social entertainment services. As we continue to invest in new business, such as offline performance and artist-related merchandise sales, the revenue mix between music subscriptions and these new business may cause fluctuations in overall gross margin. Moving on to operating expenses, they amounted to RMB 1.2 billion, representing 14.4% of our total revenues in Q4 2025, compared with 15.7% in the same period of last year. Selling and amounting expenses were RMB 266 million, up by 7% year-on-year, primarily due to higher channel selling and content promotion expenses. We will keep monitoring market conditions and increase content promotion and the channel spending as needed with our focused financial decision. General and administrative expenses were on the 981 million, up by 6% in the long year, primarily due to growth in employment related expenses. Our effective tax rate for Q4 2021 For Q4 2025, our net profit increased by 10% to RMB 2.3 billion. And the net profit attributable to equity holders of the company increased by 13% to RMB 2.2 billion. Non-advised net profit increased by 8% to RMB 2.6 billion. And the non-advised net profit attributable to equity holders of the company increased by 9% to RMB 2.5 billion. Our diluted earnings per ADS this quarter was up 1.41, up by 12% year-on-year, and the non-aggressive diluted earnings per ADS was up 1.6. up by 9% year-on-year. As of December 31, 2025, our combined balance of cash equivalents, home deposits, and short-term investment was RMB 38 billion, as compared to RMB 36.1 billion as of September 30, 2025. This combined balance was effected by changes in the exchange rate of RMB to USD at different balance dates. Next, I will discuss our performance for the full year of 2025. Total revenues were up by 32.9 billion, up by 16% year-over-year. Revenues from online mail service were up by 26.7 billion, up by 23% year-over-year. The increase was driven by strong growth in mail circulation revenues, supplemented by growth in revenues from offline performances, advertising services, and artist-related merchandise. Our mutual subscription revenues will amount to $17.7 billion, up by 16% year-over-year, primarily driven by continuous expansion of membership privileges, such as early access to legal performances, artist-related merchandise, and a wide range of premium offerings. Revenues from social and terminal service climbed by 7% year-over-year. Growth margin in 2025 was 44.2%, up by 1.9 percentage points year-over-year due to the reasons discussed earlier. Total operating expenses for 2025 were on the 4.9, up by 4% year-over-year, primarily due to growth in online employing related offenses, and hired to promote defenses and China's spending. In 2025, on-grace net profit increased by 60% to RMB 11.1 billion, and the net profit attributable to equity holders of the company increased by 66% to RMB 11.1 billion. We have organized again of RMB 2.4 billion being the disposal of an associate in the first quarter of 2025. Non-arbitrary net profit increased by 22% to RMB 9.9 billion. And the non-arbitrary net profit to the dual total equity holders of the company increased by 25% to RMB 9.6 billion. In March 2026, we declared a cash dividend of U.S. dollar, 0.12 per annum or U.S. dollar, 0.24 per annum. For the year ended December 31st of 2025, the cash dividend of approximately U.S. dollar, $306.8 million is expected to be paid in the second quarter of 2026. Finally, I'll conclude with some remarks on the outlooks. Looking ahead, we will continue our strategy to invest in content and technology. We will keep focusing on IP development and self-produced content while advancing innovative integrated products with content and platform synergy to build a richer and more dynamic music and entertainment ecosystem. We remain confident in the health goals of our business and are committed to delivering returns for our shareholders. This concludes our pro-credit remarks. Operator, we are ready to open the call to questions.

Thank you. If you have any questions, please feel free to ask a question. If you have any questions, please feel free to ask a question. Hello, good evening.

Good evening, management. Thanks for taking my questions. 管理層晚上好。 謝謝接受我的提問。 我先用中文問。 我的問題其實是關於就是在現在這個背景, 就人工智能的浪潮還有這個競爭日益激烈的這個背景下, 請問管理層對於2026年的這個戰略的展望是什麼? In light of the AI wave and also the growing industry competition, what is the company's strategic growth outlook for 2026? And how does the company plan to capture the opportunities and also address the challenges that arise? Thank you.

Thank you, Alicia, for your questions. And I will try to answer it from both of the TME's internal and external perspective. Internally, first of all, I think that TME has delivered a very solid results, including both of top line and bottom lines in 2025, with a healthy growth of subscription and impressive momentum across our non-subscription offerings. In particular, our non-music subscription business continues to grow and scale, further endorsing our content platform, Vivo. And for the music subscription side, as we mentioned, we have built a three-tiered membership system to drive effective member conversions, stronger engagement, and a deeper watershed. Our SVIP continued to scale and surpassing 20 million SVIP subscribers in just two years. So we piloted our advertising membership in late 2025 as well, and which allowing us to compete, broaden and attract new audience, setting the stage for long-term growth. On the non-subscription side, I think that we have further expanded deepening the collaborations with artists and labels and penetrated further into the offline experiences such as the live concerts and merchandise. We believe it is just the beginning. The initiatives are important to enrich the SVIP benefits and allowing us to unlock new growth possibilities and further strengthening our competitive advantage as well. From the external perspective, I think that the competition is not new to us, but our historical performance has proven that we have always remained agile to compete effectively. We remain focused on long-term value creations, and we believe that our unique content and platform strategy will continue to deliver the high-quality growth in a healthy way. Whether it is a home or a board, we firmly believe that content with lasting value is IP driven and robust IPs will always enjoy the long legacy. And their value will be further enhanced through bottom distribution, cross media collaborations and diverse monetization opportunities. And the rapid revenue growth of our expensive non-music subscription services over the past two years illustrated our strength and capability in this regard. So in year 2026, our subscription revenue will experience some short-term pressure due to the intensive competitions. But we believe that our three tiers membership and ribbon non-subscription services will allow us to grow historically, holistically, and also sustainably. And the last point that I would like to address in the 2026 outlook is about AI. We continue to embrace AI to improve our user experience on our platform and also using AI technology as a tool to improve the efficiencies in content creation and promotion. With our proficiencies on IP creation and management, we believe that with the help of AI, it will further strengthen our competitive advantage and create business value in the long run.

Thank you, Akashan. And the next question comes from .

Thank you, Manchun. Thank you, Manchun, for taking my question and congrats on the pretty solid finish in 2025. I would like to ask my question in terms of AI. There has been a lot of discussion in the market about the impact of AI on the entire music industry or the music industry. I would like to ask Mr. Guan to talk about how Tencent Music is incorporating AI into our overall products and ecosystem. And Mr. Guan, what changes do you think AI will make in the future with regard to the music, the songs, the streaming platforms, and the behavior of users? Can you share with us? So thank you. My question is about AI. So actually, I want to seek management's thoughts around the AI impact into the overall music value chain. How would TMP embrace AI as we integrate many into our products and our ecosystem and the management thinking around AI impact to music labels, streaming platforms, and user behavior? Thank you.

From the current environment, in the past three months, we have seen a profound change in AI, not only in the music industry, but also in all content industries, in terms of creation, distribution, experience, and management.

The current circumstances, especially in the recent three months, we're aware of the fact that the AI is profoundly changing not only the music industry, but also the overall industry in terms of content creation, distribution, etc.

We can see that in the past three months, there has been an increase in the number of AI songs on our chart. In the past three months, there has been an explosion.

We've already seen some of the hit songs in the recent three months created by AI.

This brings a huge challenge to the streaming and music streaming platforms because for us, we're still trying to promote the songs, especially the original songs. But we still have to actively embrace this kind of attitude. So basically, we have to be in the creative field of music. I just mentioned that we are in the creative field of music. We still have to provide the most effective and most convenient low-limit creative tools to our music creators, so that they can reduce their creative thresholds.

We will continue to embrace the AI technologies. Just now I mentioned music creation. We will continue to provide the most effective, most convenient creation tools for creators so as to create a very low threshold for creators.

But for music, the most important part, in addition to music production, the most important part is still the consumer experience. So in our current situation, we still want to ensure that we can distribute the flow of the content based on the human creation. If this flow is ensured, we also need to distribute a certain flow to be able to carry out a certain promotion of AI.

Music content remains the most important thing because nowadays, apart from the human-created content for music, we'll continue to give more distribution resources to that. Apart from that, we'll also give some traffic to the AI-generated content.

So, of course, we can now see that in fact, for us in the entire market, there are a lot of such low-cost, and there is a copyright risk of such AI music content. Even in fact, there are criminals for its copyright. Then we are also spending a lot of effort here to manage the market in such a way to ensure that our entire power can be very positive to be spread.

We've noticed that there are lots of low cost, even some content with some risks of copyright infringement. And even some of the content is already infringing the original copyright. And we're spending lots of efforts in educating this market so as to serve a positive driver to this market.

TME is still in a leading position in the music industry.

We're also one of the very first companies to fully integrate AI into the music industry.

We've already provided one-stop AI music production to over tens of millions of average users and over 150,000 professional creators already using our tiers. We're also one of the very first platforms here at home to achieve very good commercial value on AI-generated content. We believe with the further improvement of AI-generated tools, we can continue to tap more potential from customer demand and also tap more commercial value out of it. More importantly, we're also operating our AI agent similar to OpenCore.

We hope that with this AI agent, it could help our users to fulfill their target on our platform.

So in general, for TMA, the influence of AI is in many aspects. So for us, it's actually a great challenge. But we believe that this is still a great opportunity. Our current actions are also fully embracing our AI. But we also believe that in the future, it should still be a very powerful trend for us to catch up with it.

Tianyi indeed faced a lot of challenges. It is a big challenge, but we believe it remains to be a huge opportunity for us. We're embracing AI and we believe AI will serve as a positive friend to Tianyi.

I would like to add that in addition to AI, as I mentioned earlier, our entire TME group will fully embrace AI's new technology to bring the best user experience to our platform users, as well as to improve our revenue in the production of songs. 我们也会觉得当前的AI确实能帮助我们把歌的那个做得更方便,但同时间我们也看到一个歌版权那个价值不单单只是那个歌曲,更多要看到那个IP本身,所以我们未来也会加大我们的力度投入到IP的那个剧作跟创作上。

Some additional comment, apart from what just Ross discussed. So at TME, we're trying to make user creation more convenient and so as to provide a better user experience. At present, we can see that AI2 indeed is making music creation and production not convenient. But on the copyright, it's not just about songs. And IP also matters a lot. So in the future, we'll also give more input into IP creation.

We believe this is a unique advantage of TME.

The addition of our offline music experience also matters, like live concert, fan-based economy, merchandise, and these things can be hardly replaced by AI technologies. And we'll keep investing or giving more input into optimizing our IP. And in the meantime, we'll also leverage AI to improve the efficiency of music production.

Thank you. And then this question comes from Thomas Chong from Jefferies. And Thomas, please.

Thank you for accepting my question. We mentioned in the previous Q&A that we will also invest heavily in the content, IP, and products. I would like to ask how we should look at the trend this year in terms of net profit and profit growth? Thanks, management, for taking my questions. We talked about, during our prepared remarks, the investment in content, IP development, innovative products. But if we look at it from a financial perspective, how should we think about the trend in terms of our GP margin, the trend for our OPEX, and the earnings growth for this year? Thank you.

In general, our 2026 GP will stay flat with 2025.

We'll be a little bit lower than 2025.

First, with the growth of the content and advertising business, we will continue to optimize the content cost structure and continue to pay attention to the improvement of the content cost and ROC. We expect that the growth of the content and advertising business will still have an impact on our gross profit and net profit.

Number one, with the continuous growth of our subscription business and advertising business, and it will continue to optimize our cost and which will boost the DROC. So with the sustained growth of a sub and ads advertisement to the business, it will contribute positively to our GDP margin and total GDP profit.

In addition, the recent adjustment of iOS mission fee also serves as a positive driver for DeepMatch.

In addition, number three, we will continue to strengthen our economic cooperation with the high quality IP and also have more self-produced content so as to create a better competitiveness.

In addition, we will continue to strengthen our economic cooperation with the high quality IP and also have more self-produced content

Number four, we will continue to deepen and expand our collaboration with the top tier, the labels and artists, and so as to create more arriving live concerts and different audiences.

This will enrich and expand our ways of monetization.

Well, at the beginning of the development of fixed assets, it may have some minor negative impact on our GDP margin. Well, with the changes of the revenue mix, there might be some seasonal fluctuations of our GDP. In the long run, with more services meeting the diversified demands from users, it will also generate a higher ARPU of each user.

It will also generate a higher ARPU of each user.

Input into IP and copyright will also help improve our content cost. The deep bundling with the important industrial players will also provide diversified services to us and will also help improve our efficiency of each business. We believe in the long run, we will keep growing our top line and GP margin, and we believe our GP margin will stay at a sound and steady level.

In terms of profit and loss, we are currently facing a relatively large and competitive environment. In addition to the changes that AI has just mentioned, we have upgraded our service strategy by increasing the number of users. We continue to set up a war-like service. Our users' minds maximize the value of the music app. This is also the most valuable part of the music industry.

About our operating profit, we have to admit that in the face of current fierce competitive landscape and plus the changes brought by AI as we just discussed, and we will continue to give more input into content and with our strategic upgrading, and we will keep improving our one-stop music services to our users, we enhance our users' awareness so as to maximize the value of music.

We will not do large-scale, slow-moving marketing. We will focus on the core values, users, and the advantages of the ecosystem. And we will make effective investments in free content. At the same time, we will increase the intensity and accuracy of channel promotion. At the same time, we will follow the requirements of ROI to meet the basic needs of our paid users. The growth of sales costs will be faster than the growth of income.

We will not just spend on marketing by a very large margin or by a very large volume. We will still be focused on our core value, which is our users and our ecosystem. And we will keep investing in self-produced content and to improve our channel cost. And based on the ROI, and we will continue to tap more value on our paid users so as to achieve a steady and sustained growth.

二零零二六年的整体的净利率也会有所提升, 净利率会相对于二零二五年基本市值率有成长。

into 2026, our total net profit will be improved and the margin will be similar to 2025, might be a bit lower than 2025.

Thank you. And then this question comes from Alex Yabong, JP Morgan.

Thank you, management, for taking my question. Let me start with my question in Chinese. 我想再跟进问两个AI相关的问题 对咱们在线音乐的行业的影响 一个是我们也聊到现在其实 AI产生的音乐现在在迅速的成长 那他们这种成长的过程里面 咱们观察到的 He said, 那另外第二个问题呢是 If the music production threshold is greatly reduced by AI, for example, if I, Alex, pay 20 yuan for a certain AI software for a month, I can produce a lot of music on a large scale. When my music or the music produced by this kind of folk grass root AI occupies more and more market and proportion in the market, 那会不会影响今天我们音乐这行业的 版权费用或者版权收入的整个的池子 如果那个池子发生变化了以后 我们在线音乐的商业模式 需要做怎么样的调整去适应这种变化 也就是说AI把内容的壁垒和成本 大幅的拉低 甚至是影响了今天这个 I have two questions. Number one is regarding the impact from AI-generated music content, particularly on the demand side? Are we seeing AI content generate additional and incremental demand for music consumption, or this is more of a zero-sum game in terms of a total consumer time span on music content? And second question is regarding the royalty pool. If medium to longer term, the AI will demonetize the music content generation, will that gradually eat into the royalty pool from monetization perspective? And if that's the case, should we consider changes to our business model to fit the new supply side of the change? Thank you.

These are two interesting questions. So, first of all, from our perspective, the biggest change in AI is mainly in the environment of networking.

These are very good and interesting questions. Number one, I think in nature, AI is already changing the nature of the music industry.

In the past, we saw lots of hit songs from the internet, but you never know who is the singer behind it. In the very recent three months, very interestingly enough, we do see some hit songs on many music rankings. Yes.

Well, we have known that the short-form video sites have already given a big boost to this AI-generated music.

第二点其实是可以看到非常明显,就是它是大部分是以翻唱为主的。 But most of the songs are not original songs. So if you look at this sector, the AI-generated content are rarely original. 在歌曲质量本身并没有那么大的超越,主要还在于唱歌的音色相比于其他人会有一个更加完美的一个现象。

So as you can see on Datouzhen, most of the songs are to re-song. So basically the quality itself is rarely changed.

What is changing is the sound quality. So we believe that at home, for a long time, AI will have a great development in the field of singing. But in itself, Maybe in the long run, the racing by AI will experience a rapid development.

But in terms of the question you just asked about the consumption of the original songs, we are not aware of big changes.

For the second question, for UJC, in the end, you may find that there is an interesting situation with UJC in the future with pictures and videos. It is a very large UJC scene with the same scale. There are a lot of people who can make a lot of songs or take a lot of pictures and videos like now.

As to the UGC or, well, you may see a similar trend to the UGC tags and videos, which is to say that maybe in the future, many people can make music, like they can take pictures and videos now.

So you have to look at whether it's Instagram or Facebook, or TikTok or TikTok right now, the future is probably the same phenomenon. That is to say, UGC itself is only able to spread more in its own social network, in its own relationship circle. But in fact, in the copyright part or in the division field, it still comes from PJC or what we call OJC. So the music is the same. 所以这个问题的答案就是我认为目前在无论怎么样UJC也仅仅只能去提升我们在用户之间的一个这样的一个传播方式,但是它基本上对于我们目前的版权分成是不会有多大改变的。

Well, if you look at INS, Facebook, TikTok, or Douyin, well, it may be well distributed among the social media, just between the familiar users. But if you look at the copyright loyalty or the revenue sharing, it still comes from PGC or OGC. So it's the same for the music industry.

So my opinion is that UGC will be well distributed among the familiar users, but in terms of royalty and revenue sharing, we do not see material changes.

We are spending lots of efforts trying to make a platform to allow our users to create or produce music. And we hope that in the future on TME platform, we can also make a social platform about music content.

I would like to add that this is indeed a very important issue that we need to think about carefully. From the current perspective, as Ross said, we are very concerned about AI songwriting. AI tools are used in the creative process. But when it comes to singing, it uses real people, real IP. It's the same as traditional songs. But if you use AI's virtual voice and these songs, it won't be able to Thank you very much.

Well, I want to have somebody to comment. First of all, this question really deserves more thought. And I think this is also a critical question. And just to follow up by what Ross said, AI generated music or content, if it is still sung by human sound, while revenue sharing mechanism will remain the same with traditional model. If this is a wholly AI made, while you have a different royalty-sharing model. But on those UGC platforms, maybe they have to adopt an incentive model or something else, but it doesn't generate any material change or impact on the current business.

We have time for one more question. It goes to Maggie from CLSA Magnet Institute.

Thanks, management, for taking my question. Since this is the last one, I'll get a housekeeping one. Wondering if there's any updates you can share with us regarding the proposed Himalaya acquisition deal. And partly relating to that, what's management thought on the share rate purchase program? We noticed that there's still a large quota left. Thank you.

My last question is a bit short. One is about the new information about the trade in Himalaya. The other is that we still have a lot of money to buy back, so we still have a lot of time to buy back.

We are still actively communicating with the market. If there is a change in the news, we will announce it to the public.

We're still communicating with the regulator of the Somalia deal. If there is any update, we will disclose it at the point.

Regarding your second question, we are very important to the shareholder's return on investment. So you can see that in terms of the shareholder's return this year, we also have a more significant growth than last year. This also represents our importance to the shareholder.

We have always valued our shareholder return. This year, as you can see, our dividend payout is far higher than last year, which shows the spread at the size of the share.

As for the return on our stock, we have already approved a two-year return plan. We will actively carry out the return on our stock in accordance with the requirements of compliance and supervision.

currently about the share buyback, we'll speak to the previous plan and we will respond to market needs while meeting the regulatory requirements.

Thank you. Thank you everyone for joining us today. If you have any further questions, please feel free to reach out to the IIT. And this concludes today's call. And again, thank you and look forward to seeing to your next call.

Thank you very much.

Thank you. Thank you.