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Tencent Music Stock Outshines Spotify as China's Music Giant
Written by Leo Miller. Published 8/31/2025.
Key Points
- Tencent Music Entertainment Group has seen its share price more than double in 2025.
- The company is the leading music streaming service in China. Spotify is investing in the firm, rather than challenging it.
- With growth accelerating, profitability improving, and a runway for growth, investors should consider TME.
If you thought Spotify Technology (NYSE: SPOT) was the best-performing music streaming stock of 2025, think again. With shares up nearly 54% year-to-date, Spotify has had an impressive run. However, that pales compared to Tencent Music Entertainment Group (NYSE: TME), often dubbed the "Spotify of China."
So far in 2025, TME has delivered a total return of about 122% as the company accelerates revenue growth, boosts profitability and adds tens of billions to its market capitalization.
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Below is a closer look at why Tencent Music has surged ahead—and whether it belongs in your portfolio.
TME's Dominance in China—And Spotify's Stake
TME is China's largest music streaming platform, with over 550 million monthly active users and nearly 125 million paying subscribers—more than double the scale of its closest competitor, NetEase Cloud Music (around 200 million users). Spotify isn't officially available in China, so TME effectively holds a monopoly on the country's streaming market.
Rather than challenge that position, Spotify appears to have taken a different tack: it now holds a significant stake in TME. As disclosed on page 11 of Spotify's latest annual filing, most of its long-term investments relate to Tencent Music, valued at roughly $1.6 billion at the end of 2024. If anyone understands the economics of streaming, it's Spotify—and its investment underscores TME's strength.
Q2 Results: Accelerating Growth and Profit Margins
In the second quarter, TME posted its seventh consecutive quarter of accelerating revenue growth, with sales up 18% year-over-year after a 2% decline in the same period last year. Gross margin expanded to 44.4%, rising 240 basis points from a year earlier and more than 1,000 basis points versus two years ago. Operating margin climbed to 35.3%, up 460 basis points year-over-year from 21.1% in Q2 2023.
Paying users grew by 6.3%, and average revenue per user increased 9.3%. The strong beat prompted a 12% jump in TME's share price following the Aug. 12 earnings release.
Analyst Targets and Valuation Edge
The MarketBeat consensus price target for TME is about $24.50, implying a modest 2% downside from the Aug. 28 close. However, recent analyst updates lift the average target to roughly $28.25—suggesting 13.5% upside.
Trading at a forward price-to-earnings ratio near 27 times, TME appears inexpensive next to Spotify's roughly 59 times forward P/E—a 120% premium. Spotify justifies its higher valuation with more than 150 million additional paying subscribers and over triple the revenue per user, plus a global footprint versus TME's focus on China.
Significant Growth Runway in a Huge Market
Despite its strong market share, TME's paying-user penetration sits at only about 9% of China's 1.4 billion population. By contrast, Spotify Premium penetration in the U.S. reached 16% of a 340 million population as of early 2025. That gap highlights TME's room for expansion.
With leadership in China, improving financial metrics and even backing from Spotify itself, Tencent Music presents a compelling case for investors seeking growth in the world's second-largest economy.
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