Tencent Music's income exceeds estimates due to a rise in subscriptions

Tencent Music Entertainment Group (NYSE:TME) quarterly revenue predictions were surpassed on Monday, as a slate of original content and pandemic-driven lockdowns helped its Spotify-like music streaming platform attract more paying customers.

In extended trading, the company's U.S. shares surged by 3% following the report that the number of paying online music users increased by a quarter to 82.7 million as a result of China's tight stay-at-home orders. The revenue generated from music subscriptions grew by 18%.

A push for new content, including a partnership with Tencent Holdings (OTC:TCEHY) to generate music from popular video game titles, was also beneficial to the company.

However, there were signs that tight competition and a slow economy as a result of Beijing's zero-COVID policy were affecting Tencent Music's business.

Sales for social entertainment, the company's largest revenue source and home to its karaoke app WeSing and live concert platform Kuwo Music, decreased by 20%.

Tencent Music claimed that it hopes to boost the division's growth by offering audio live streaming capabilities.

Last year, the company was forced to cede its exclusive ties with major music labels due to regulatory scrutiny, eroding its competitive advantage against Cloud Music and Bytedance's short-video sharing platform Douyin.

According to Refinitiv IBES figures, total revenue for the second quarter ended June 30 was 6.91 billion yuan ($1.02 billion), exceeding analysts' expectations of 6.62 billion yuan.

The company's earnings per American depository share (ADS) were 0.63 yuan, which was above the average estimate of 0.56 yuan per ADS.