Thank you, Millicent. Hello, everyone, and thank you for joining our call today.

In the second quarter, we delivered resilient performance while navigating a complex and evolving market. Our second growth engine continued to strengthen.

Revenue from marketing and consumption services achieved another quarter of solid growth as we further expanded the value of music IP through live concerts, merchandise, and other IP-driven experiences. The addition of Ximalaya marks another important step in our content and platform strategy.

By bringing music and audio together, we are enriching our content offering, reaching users across more listening occasions, and giving them more ways to discover, enjoy, and engage with great content. Our strategy is clear: we are strengthening our content ecosystem by deepening strategic partnerships, developing more proprietary IP, and extending premium content across a wider range of listening experiences.

First, premium content remains at the heart of this strategy, and the recent momentum we are seeing with classic catalogs is a perfect example. Hit variety shows and concert tours have amplified the reach of this work, making loyal fans more engaged while drawing in a new generation of listeners.

This has lead to continuous growth in their streaming share. Second, we continue to expand our partnerships beyond traditional content licensing.

Recently, we deepened our partnership with Dream Music Group. In addition to securing digital-first releases for its top artists, we expanded our collaboration into new areas, including content co-creation, physical offerings, and offline experiences.

At the same time, we partnered with Huace Film & TV, Ruyi Film & Entertainment, and Zhejiang Satellite TV to bring original soundtracks and popular music variety shows to our platform, creating a more immersive connection between music and visual entertainment. These deeper partnerships allow us to work more closely with creators and rights holders across the whole music value chain, enabling us to create more value from premium IP.

Third, another key focus is developing more high-quality proprietary content, which is becoming an increasingly important differentiators for TME and giving users more reasons to engage with our platform. Examples include Zhou Shen's "Passing Through Bloom" (热烈盛开), the theme song for the 2026 Jiangsu Football City League; Liu Yuning's "Borrow a Little Light from Ordinary Days" (平凡的日子借一点光), Kugou Music's new brand anthem; and the theme song and interlude song for the hit animated film All Wishes Come True (八仙), all of which recorded strong streaming performance since their release.

Fourth, Ximalaya further strengthens our content advantage with its premium audiobooks and podcasts. By adding popular categories like online novels, history, kids content, and education, we can reach users across many other more listening occasions, ultimately enhancing user time spent and engagement within our ecosystem.

What really stands out is Ximalaya's ability to create its own hits. Its original productions have consistently driven strong engagement and pay conversion.

In fact, 9 of its top 10 new online novel titles this year were produced in-house, underscoring both the strength and scalability of its original content capabilities. Just as importantly, owning these hits also means better economics.

With the strength of our content and platform ecosystem, deep user insights, expansive services, and a strong commitment to upholding copyright protection, a growing number of artists are turning to us as we expand talent development and artist management. This is a natural extension of our ecosystem that creates value for artists we are uniquely positioned to deliver.

This is exciting as it empowers us to be more entrepreneurial and innovative in bringing more premium content and IP-driven immersive music experiences to music lovers. First, take rapper Zhou Yan, GAI, for instance.

As his strategic partner, we have supported him across content promotion, IP development, and concert planning, helping him expand into new markets and formats and grow from arena shows to stadium concerts. Following the success of his Evolution tour in Asia, we launched Real G, the first Chinese language rap stadium tour in China.

More than 30,000 fans attended his opening show in Xi'an. TIA RAY, Yuan Yawei, is another good example.

Her Once Upon a Moon tour wrapped up with two consecutive sold-out arena shows in Hangzhou and is now reaching international markets, showcasing her rising profile and growing fanbase. We are also helping artists expand into new opportunities.

For renowned actor and singer Steven Zhang, Zhang Xincheng, we produced his debut arena tour, New Journey, and his opening show in Shenzhen sold out quickly during presales. Second, recently we invested in THE BLACK LABEL to deepen our collaboration on a broader range of IP-related initiatives, including artist promotion and merchandise development, helping leading artists to build deeper connections with their audience in China.

This strategic partnership reflects our commitment to exploring cross-border opportunities and deepening the fan-based economy. By integrating content creation, music streaming, artist development, live experiences, merchandise, and fans engagement, we are able to create more value from premium IP, truly bringing the IP to life.

We are already seeing encouraging results. IP-related consumption services, particularly live events and artist merchandise, continued to deliver strong double-digit year-over-year growth during the quarter.

First, in live entertainment, we hosted three fan meetings in Macau for SM Entertainment's trainee group SMTR25. The event attracted tens of thousands of fans and generated strong merchandise sales.

TIMA, our proprietary flagship concert IP for international music awards, is becoming a larger and more influential brand in just its second year. Building on last year's success, we scale up the venue to Kai Tak Sports Park Stadium in Hong Kong, including audience capacity by more than three-folds three-folds, capturing music lovers' growing enthusiasm.

Second, artist merchandise also continued to gain momentum. By bringing together our capabilities in IP development, product design, merchandising, and distribution, we are creating more meaningful connections between artists and their fans.

During the quarter, we produced Zhou Shen's physical albums in both CD and vinyl formats, complemented by a range of collectibles merchandise that generated strong fan demand. Physical album releases from Kun, Cai Xukun; Chen Chusheng; and Wu Yiting also delivered impressive results.

Protecting copyright is fundamental to preserving the long-term value of premium IP. During the quarter, we continued to strengthen our copyright protection efforts through proactive screening and takedown, legal action, and closer collaboration across the industry.

As AI continues to evolve, we are stepping up our engagement with regulators, music labels, artists, and other industry partners to strengthen copyright protection in the new era. By working together across the industry, we believe we can foster a healthier and fundamental environment for creators, reinforce the long-term value of premium IP, and support the sustainable development of the music industry.

We remain committed to providing a safe and enjoyable music experience for users of all ages. During the second quarter, with comprehensive upgrades to Youth Mode across our core products, we curated a dedicated library of age-appropriate music, helping younger users discover and enjoy music in a safer and more trusted environment.

To conclude, while challenges remained, we believe we are still in the early innings of unlocking the full potential of premium IP. We are excited about the opportunities ahead and remain confidence in our ability to deliver sustainable long-term growth.

With that, I will turn the call over to Ross.

Thank you, Cussion. Hello, everyone.

While the competitive landscape continues to evolve, our commitment has not changed: delivering the best music and audio experiences for all users. Every user listens differently.

That's why we continue to innovate our products, broaden our user reach, and enrich our membership offerings. In the second quarter, our focus on user experience translated into stronger engagement, with average daily time spent continuing to improve, supporting standing growth in membership revenue.

Product innovation remains at the heart of everything we do to serve our users. This quarter, we created a more seamless discovery-to-playback journey through improvements in content discovery and audio quality.

Enhanced content discovery features, such as Swipe tabs and video feeds, helped users explore more relevant content in a more engaging way. Newly introduced 3D NiCan (3D丽音) audio also allowed freemium users to experience premium sound quality from their very first listen.

Thoughtful application of AI also made music discovery more intuitive and personalized. We upgraded our AI agents across QQ Music and Kugou, enabling them to better understand nuanced user intents, acting as personal DJs.

These AI agents can now instantly create personalized playlists tailored to users' listening needs in the moment. Together, these improvements helped users discover more content, bolstered their time spent on our platform, and increased the share of recommendation-driven streams.

While delivering great services is the foundation, reaching more users is equally important. That's why we are continuing to deepen our integration with the Tencent ecosystem to expand our presence across more user touchpoints.

First, we deepened our cooperation with Weixin Video Accounts by bringing leading labels, top artists, and independent musicians into its ecosystem. We are creating a more seamless journey from music discovery to full-track listening on TME.

Collaborations with Weixin Pay also helped our lightweight products, such as Boda Music and Kugou Concept, attract users looking for a simple music experience and deepen their engagement. Furthermore, we recently integrated with Weixin's AI agent, Xiaowei.

We are pleased that by tapping into Weixin's massive user base, more users can now discovery songs, generate playlists, stream music with easy commands, and instantly share favorite tracks with friends. Together, these initiatives are expanding our user reach, improving conversion and engagement, as well as enhancing content distribution across the Tencent ecosystem.

Second, we are also extending our user reach beyond mobile and PC into cross-device listening scenarios. During the quarter, we broadened our smart vehicle coverage through deeper collaborations with leading automakers, including Changan, Li Auto, and XPeng, and introduced LLM-powered search to deliver a smarter in-car experience.

We were also among the first music platforms to integrate with HarmonyOS, expanding our reach within its fast-growing ecosystem. Such a move has transferred our presence among HarmonyOS users and positioned us to capture new opportunities for further monetization.

We are excited to welcome Ximalaya to the TME family. Music and audio naturally complement each other.

They broaden our content offering and create more listening occasions throughout the day. This helps strengthen our position as a comprehensive music and audio platform.

We are still in the early stages of unlocking the full potential of this combination, and we are seeing significant opportunities ahead. By bringing together our complementary strengths, we can deliver compelling content to a much broader audience.

We are starting to enrich our SVIP offering with premium audio content to create richer listening experiences. Over time, we also see opportunities to strengthen our advertising business and improve efficiency, leveraging our shared technology and infrastructure.

We believe these efforts will create lasting value for our users, creators, partners, and shareholders. Finally, we are further elevating the SVIP value proposition by transforming it into multidimensional experiences centered on IP engagement.

Premium music remains at its core, now complemented by premium audio and a growing portfolio of IP-driven member benefits. This quarter, digital albums and tailored SVIP package continued to drive stronger member adoption and user engagement.

Packages for Renjun, Huang Renjun; Lay Zhang, Zhang Yixing; aespa; and RIIZE featured popular member benefits, such as photo cards and NFC cards. We also expanded our StarLive card lineup by adding artists from THE BLACK LABEL, including TAEYANG, SOMI, MEOVV, and the ALLDAY PROJECT.

Meanwhile, collaborations with popular gaming IPs, such as Wuthering Waves (鸣潮) and Light and Night (光与夜之恋), brought new themed decorations to SVIP users, generating stronger user engagement and conversion. Together, these offerings contributed to healthy growth in our SVIP user base, ARPPU, time spent, retention, as well as consumption of other premium ancillary experiences.

They reinforce our value proposition of one membership, richer experiences. To conclude, our journey reflects how we have evolved from a gateway for content into a strategic platform that actively shapes the music and audio entertainment landscape.

Our focus remains steadfast: creating deeper and more meaningful connections between creators, content, and audiences. We are uniquely positioned and confident that we can translate these deep connections into long-term sustainable value across music and audio.

With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials.

Thank you, Ross, and greetings, everyone. Happily, now turning to our financial results.

Amid an evolving competitive industry landscape, we delivered steady financial results in the second quarter of 2026, with 6% year-on-year revenue growth. Total revenues were RMB8.9 billion, up by 6% year-on-year, primarily driven by strong growth in revenues from music-related services.

The consolidation of Ximalaya contributed approximately RMB0.4 billion to our overall revenues in the second quarter of 2026. Revenues from music-related services grew 11% year-on-year, driven by solid growth in revenues from membership services and offline performance-related services.

Revenues from membership services were RMB4.8 billion, up by 8% year-on-year. In the second quarter of 2026, our SVIP membership program continues to expand.

Our diversified SVIP privileges, such as artist membership sales, photo cards, and StarLive cards, continued to drive SVIP user adoption and revenue growth. This quarter, we collaborated with our SVIP ambassadors to offer special packages and improve our SVIP offering.

The consolidation of Ximalaya also contributed to revenue growth in membership services. Within marketing and consumption services, offline performance-related services delivered robust results as we successfully staged several concerts for our strategically collaborating artists, including Silence Wang and Sheng Yichen.

Sales of digital albums also achieved solid performance, primarily driven by the launch of Jay Chou's album, Child of the Sun. We continued to prioritize our IP-related offerings and build deeper collaborations with strategic artists across music promotion, offline performances, artist merchandise, and digital albums.

In a challenging macro environment and a competitive market, our advertising business, especially the ad-supported model, are experiencing some headwinds. We continued to take actions to improve ad exposure, enhance entry reach and eCPM, and offer more engaging, interactive products for users.

We are also deepening collaboration with the Tencent ecosystem to reach more users. The consolidation of Ximalaya contributed to revenue growth in advertising positively, and we see growth potential in this era through leveraging of our expanded contents and shared resources and technologies.

Our gross margin in Q2 2026 was 44.2%, compared with 44.4% in the same period of last year. Revenue mix impacts our gross margin.

Offline performance-related services continued to grow. We are happy to see continued profitability improvement for offline performances-related services.

The consolidation of Ximalaya, after considering the amortization of intangible assets recorded under purchase accounting, had a favorable impact on our gross margin this quarter. We are confident that our gross margin will remain competitive in the industry over time.

Moving on to operating expenses. They amounted to RMB1.3 billion, representing 14.5% of our total revenues in Q2 2026, compared with 13.7% in the same period of last year.

This quarter, we adjusted our channel spending strategies by reducing channel spending and deepening collaborations with the Tencent ecosystem. For example, we strengthened our cooperation with Weixin Video Accounts for content distribution and user conversion, and collaborated with Weixin Xiaowei to drive traffic to our lightweight apps.

The consolidation of Ximalaya, including the amortization of intangible assets recorded under purchase accounting, drive the increase in operating expenses. Going forward, we expect to dynamically adjust our channel spending strategies for all our buildings according to evolving market conditions with our ROI requirements.

Our net profit attributable to equity holders was RMB2.5 billion, compared with RMB2.4 billion in the same period of 2025. Diluted earnings per ADS this quarter were RMB1.57.

For Q2 2026, our adjusted EBITDA was RMB3.3 billion, up by 5% year-on-year. Non-IFRS net profit attributable to equity holders of the company was RMB2.7 billion, up by 4% year-on-year.

As of June 30, 2026, our combined balance of cash, cash equivalents, term deposits, and short-term investments was RMB44.2 billion, as compared to RMB41 billion as of March 31, 2026. This combined balance was effect by changes in exchange rate of RMB to USD at different balance sheet dates.

In addition to our strong operating cash flow, we maintained diversified financing options to meet our strategic expenditure requirements. Under the share repurchase program announced in March 2025, we have repurchased 43.5 million ADSs from the open market for total cash consideration of US$400 million in the second quarter of 2026.

As part of our long-term commitment to shareholder returns, we remain on track to complete the 2025 share repurchase program on time. Looking ahead, we continue to focus on the development of SVIP membership, creating more innovative products and providing more diversified benefits and privileges to our users.

We also keep investing in quality content and IP development to build a comprehensive content ecosystem. Additionally, we continue to deepen collaboration with Tencent ecosystem.

Consolidation of Ximalaya brings exciting opportunities for us as a leading music and audio platform. All these factors pave the way for long-term healthy growth of our business.

This concludes our prepared remarks. We are now ready to open the call for questions.

Hi, thanks for this opportunity for asking questions. Congrats on very strong results.

My question is, there are two questions. The first question is on the IP-related business.

IP has been a key driver for our revenue in the first half of 2026, and I was wondering how will the IP-related business drive the revenue growth for the rest of this year and how's the momentum and outlook looks like there. The second question is really on Ximalaya consolidation.

Now that Ximalaya is already part of the TME group, how should we think about the financial outlook after Ximalaya's consolidations and its impact to the TME financials in the second half of this year? Thank you.

我两个问题。第一个是关于IP的业务，我们可以看到今年上半年IP的话也是我们整个业务增长很核心的驱动力，想了解一下如果展望今年下半年的话，那IP业务的这个趋势会是怎么样？能不能给我们展望一下未来的前景？第二个问题呢是关于喜马拉雅，我们都知道喜马拉雅现在已经完全整合到腾讯音乐的集团内部了，那么能不能给我们讲一下喜马拉雅未来的一个财务的前景，也就是在整合之后，包括对于整个腾讯音乐的整体情况？ 好，谢谢Alex的问题啊。第一个问题关于我们IP上面的一个发展。其实当前基于我们第二季度的整体的业绩的实现，我们一个非常稳健的增长。而且当前呢其实基于我们多年以来的一个比较有前瞻性的一个布局，所以我们当前已经构建到一个比较有差异化的，背靠平台跟内容，线上、线下以及虚拟跟实体的，一个完整的音乐生态。所以这个事情里面呢就让我们更快好的体现我们IP的多元化，而且在这个过程里面我们给我们带来更多的一个，特别是营销还有消费类的服务，让我们整体的收入在过去几个月，几个季度里面都有强劲的增长。

About your first question, it's about IP-related business. As you can see that we have achieved a solid growth in our Q2 results.

That is mainly due to our many years of deployment of our forward-looking strategies. We have already built a differentiated platform that features content plus platform, that combines both offline, online services and products, also combines virtual and non-virtual products.

This is a complete music ecosystem, and that also can fully leverage the diversified IPs, which you can see also that we have a lot of contribution from marketing and consumption-related services. All of this have contributed a lot to this quarter's result.

虽然今年的竞争的环境呢给我们整体的会员订阅以及广告的业务带来一定的压力，但是像我刚才讲到的，像演唱会等等的IP相关的消费类型的服务，基于我们当前拥有的优势呢，我们觉得还是我们可以持续的给我们业务带来一个比较稳定的增长。这个最主要的是由以下几个不同的层面的。第一个呢，我们在IP里面相关的生态的供给，我们当前除了内部我们自主的研发以外，我们也会跟不同的外部的合作方有深度的合作，让我们在整体的IP的打造里面，我们可以产生更多的高品质的IP。第二个维度呢，我们也可以看到整体因为我们是通过内容的深度的合作，再到内容的宣发，以及衍生产品等等的全过程的一个掌握，这个也是TME的一个相关的优势。那最后一个层面呢就是我们有多元化的一个变现的场景，所以我们可以通过平台的能力，我们IP的价值不仅仅仅限于演唱会呀、周边产品产品等等，这个也帮助我们有更多的一些相关的特权可以反哺到我们SVIP的会员的那个包月的业务里面，所以这些多场景的价值呢也成为我们一个非常坚实的护城河。

For this year, competition, we do see some headwinds from the competitors area, be it in the membership and ads business. Our IP-related services, including concerts and performance, are experiencing steady growth mainly because of the following reasons.

Number one is our IP supply. Apart from our in-house research and development, we're also carrying out a lot of the deep collaboration with external suppliers, and which help us build a high-quality IPs across the board.

Second, you can also see that in terms of content collaboration, apart from that, on the promotion, distribution, and merchandise, this derivative products, we're also in a very good position. Number three is the diversified monetization.

Through our platform, it would not only provide performance, concerts, or merchandise, and through our member benefits, it could also contribute more to the increase of our SVIP numbers. All of this have helped us build a very solid competitive moat.

关于你第二个问题提到的喜马拉雅呢，我们也非常的欣喜啊。随着喜马拉雅加入到TME的那个大家庭之后呢，我们可以让整个TME的集团，我们能实现像一站式的音乐加音频的服务平台的战略性的升级，所以这个也扩大了我们的用户群体，丰富我们用户的画像，这个也进一步的提升用户的时长还有忠诚度。所以整合了喜马拉雅加上我们刚才在平台、内容里面那个独特的优势呢，我们对于整个集团中长远的那一个发展，我们觉得是能释放一个更好的动力，为我们未来的增长打了一个更好的基础。

About your second question on Ximalaya, we are very pleased to have Ximalaya to be part of TME family. With Ximalaya on board, we have already built a one-stop music plus audio platform, and which help us amplify the user base and also enrich the user profile and also increase time spent on our platform.

Overall, in the medium to long run, we can see that Ximalaya's joining to TME family will also unlock more potential of future growth, and this has also set a solid base for future growth.

Thank you, management, for taking my question. My question is about the subscription business.

Basically in the first half or in second quarter, if we excluding Ximalaya, we do see some moderation in subscription revenue growth. How should we think about the prospects into the second half of the year?

What's sort of the growth trend for SVIP or the overall ARPPU to contribute to the overall growth? Could management also elaborate a bit more on the latest status in terms of the competition, especially against Soda?

Thank you.

我的问题呢是关于我们的订阅业务的。其实看如果上半年尤其是第二季度的话，如果我们除去喜马拉雅这一部分的话，我们可以看到这个订阅业务实际上收入是在放缓的。所以管理层能不能跟我们展望一下就今年下半年的整个的一个前景，包括SVIP啊，还有ARPPU的整个的一个趋势。然后另外的话能不能跟我们讲一下现在这个整个这个音乐行业的一个竞争的一个现状，尤其是和这个汽水这边的一个情况？ 对，我们确实可以看到在第二季度的时候，我们在这种竞争的持续的影响下，我们的音乐相关的会员收入的增速是有所放缓。

With the competition in hand, we can see that the growth in music-related business is slowed down. 对，但这个其实主要还是确实是一个流量上面的一些影响，那我们就像我刚才提到的，我们最重要的一部主要还是我们跟微信视频号的合作。

It's

mainly some impact on traffic, but as we said, the most important thing is our collaboration with Weixin Video Accounts.

所以说我们其实已经很欣喜地可以看到，我们目前已经TME现在已经开始整体的去负责腾讯视微信视频号中垂音乐这个垂直类目的运营，同时我们也能够可以看到在从视频号到我们的整个App的从Q到QQ音乐这边的链路线路基本上已经打通了。

We are also very pleased to see that TME is already taking charge of a music business operation under Weixin Video Accounts. The connection between Weixin Video Accounts and QQ app has already been very smooth.

从实际的收入表现来看，我们其实可以看到我们应该说最重要的SVIP高价值用户这部分并没有受到太多的影响，主要还是确实受到轻度用户的一个冲击。

If we look at revenue-wise, our high-value users or SVIP has not been heavily affected. What has been most heavily affected is for those casual or light users.

所以从订阅用户的运营上来看，我们一定还是在稳固我们目前的SVIP的基本盘，同时把更多的权益放到我们的SVIP的权益包里面去提升它的规模跟ARPPU。

If we look at our subscribers, we'll try to stabilize our SVIP base and try to put more benefits into the SVIP package to increase its total number of base.

所以这里面就包含了刚才Cussion提到的我们的周边衍生品，然后演唱会，以及我们在喜马拉雅收购进来以后，能够提供更有价值的长音频的内容。

This includes like Cussion said, merchandise, performance, concerts, and with Ximalaya, we can also provide more high-value long-form audios. 所以相比于其他的其他的竞品，我们的其实核心的音乐业务实际上是能够保持很强的差异化和健康的增长。

Compared with our peers, our core music business is still having a solid and healthy growth.

而对于在这个轻量用户这部分，我们还是重点的会去发掘我们现在新的小的轻量级App的一个增长，这里面主要是波点音乐跟酷狗概念版，以及我们在这一季度所推出的酷狗免费版。

To acquire more light users, we're also tapping the potential from those light and small apps, especially like Boda Music, Kugou Concept, and the Kugou Free version, which we released at this quarter. 所以基本上来看，我们相信就是在我们目前这样的一个从跟视频号的紧密合作，以及我们自己去稳守稳固我们的大盘，然后去深入发掘我们的高价值用户，我们相信我们能够有我们自己这边能够受能够更积极的去面对这样的竞争环境。

We believe through a deeper collaboration with Weixin Video Accounts, by stabilizing our main business and tapping more potential from high-value users, I believe we can stay in a very good position against competition.

从竞争这个角度来说呢，我们其实来看就是我们首先对于TME来说，在这么多年来一直其实是面对着竞争的环境的存在，所以我们其实最重要的一点还是做好我们自己。

In terms of competition, TME has never been absent from competition over years, the most important thing for us is to do our own job well. 所以相比于其他的竞品来说，我们应该就像刚才我们也提到，我们已经完成了通过喜马拉雅的加入，我们已经完成了我们从音乐业务向音乐加音频整个综合性的服务平台的转型。

Compared with our peers, with the consolidation of Ximalaya, we've already finished our transition from a music platform to a music plus audio comprehensive service platform.

所以未来其实在TME的平台上，我们相比竞争对手，我们就能够提供比其他更丰富的内容、更多元化的渠道，以及我们在线上、线下更加丰富的权益。

Compared with our peers, in the future on TME platform, we can provide more enriching content, more channels, and also more benefits that cover both online, offline. 所以无论对方怎么演变吧，我们仍然还是会坚定的沿着我们自己的道路，我们相信在这条路径之下，我们的整体的一个业务还是应该能够保持比较稳定的一个增长，稳健的发展吧。

No matter what happens in competition, we will stay firm on our own track of development, and we also believe that our business will continue to have a stable and steady development.

Thank you, management, for taking my question. Especially thank you for playing such a soothing music ahead of the conference call.

I really enjoy listening to 给平凡的日子添点光, and also all the best to the business transition. My question is about the integration and synergy with the Weixin Xiaowei, the Weixin agent services.

You guys highlighted the Weixin Xiaowei integration and the upgraded AI agents acting as a personal DJs in QQ Music and Kugou. What measurable changes have these products produced in discovery, listening time, retention, or conversion?

What is the intended monetization path? Does management primarily view AI as an engagement and a cost efficiency tool or can AI become a direct revenue contributor?

Thank you. 谢谢管理层啊，非常感谢管理层在这个会议之前播放的几首很好听的音乐。

我的问题是关于这个微信小微啊和这个AI agent一件事情，包括这个我们最近也是这个AI

agent也有一个升级，可以在QQ音乐和酷狗音乐当做这个个人DJ。那我想问问就是这些包括微信小微和这个AI agent它有没有实质性的比如说增加了留存，增加了转化，或者增加了用户的一个使用时长？那么关于它的这个具体的变现的路径管理层是怎么想的？那关于这个AI的技术，那么咱们是把它当做一个降本的或者是成本管理的一个工具，还是说它能够成为一个真正的收入的一个贡献来源？

对，应该说首先小微目前还是在测试中，所以我们目前在其实我们是作为一个很重要的一个skill来存在的。 Weixin Xiaowei is still under testing, and we take it as a very important skill.

所以从那么早期的测试里面我们可以也比较欣喜的看到，对于从用户去建立自己的歌单，然后去分享自己的歌曲已经成为在微信在微信这个助手里面比较常用一个应用。 Though it's still at an early testing stage, we're very happy to see that the users are using it to set their own song list, share songs, and they're using it very frequently.

对我们自己现在目前在我们自己的App中所升级的这样就我们自己的一个基于大模型的，尤其是跟混元密切合作，就基于混元的这样的一个音乐AI agent，我们其实发现确实对我们的里面的高价值的用户，就高活跃人群的留存提升是非常明显的。

With our app internal upgrading, especially with the integration of HY3 and plus our music AI agent, we can tell that it does increase the retention, especially for the high-value users.

而且我们在最近其实大家可以去体验一下我们在最近的Mac版本里面，我们发布两个重要功能，一个是刷歌，一个是AI的DJ。那在Mac上的一个AI陪伴电台能够充分的在Mac这个办公场景下去体现用户的一个参与度。

Recently, you can also try some new features on a Mac version, especially two new features: one is you can swipe to listen to music, and second is the AI DJ, basically can use it as a companion DJ station.

同时我们也发现其实通过GPT模式所提升的我们的算法，已经能够很好的去推进我们推荐的参与度，我们最近的一个算法也被顶级的这样会议所采纳了。

With our latest algorithm, the GPT model, and we can see that it also increased the engagement of recommendation, and our recommendation has also been adopted by one of the top tier conferences. 那至于助手刚才说至于助手这边的商业模式是相对比较清晰，它主要还是去提升用户的活跃度，然后同时在分享跟听歌的时候还是根据我们本身的内部策略，就基于我们目前的付费墙这个模式去提升我们这种订阅用户的增长。

About the monetization on AI agent, I think the business model is very clear. We'll use that to increase the engagement and activity of our users, and so they will use it more often to share and listen to songs, especially for those unpaid users that will further drive the growth of subscription.

那对于整体的AI技术这部分，其实我之前我们在前面前面几个季也都谈到了。当然就是说本身跟其他的普通其他的公司来说，当然降本身的去提效跟降本是AI工具本身一个比较标准的用法。

About AI technology in general, we talked about this topic in a previous quarters call as well. AI itself compared with others in nature is also a tool to improve efficiency and cut cost.

但是我们特别要提我们特殊的地方主要还是在于对于C端消费端用户的AI去使用大模型去产生音乐这部分的业务。那么经过这两年的发展，我们这两部分这部分业务在比如在酷狗的AI-K和在QQ音乐里面的AI作歌都取得了非常好的商业化的进展。所以我们其实核心目的我们还是确实像刚才我们仍然是希望通过AI技术采用能够帮助我们更好的去找到其中的这种商业化的机会，去提升我们本身的收入。

However, what is the special about us is on the consumer side, we use AI, especially large language models, to generate music. Over the past couple of years, we've already used that in our app like Kugou AI-K and the QQ's also using AI to generate songs.

All of this have also generated very good commercial returns. We hope that we can use AI technologies to tap more commercial opportunities and increase our revenue.

Hello. Yeah.

Can you hear me?

wonder management can share your insight. What is the competitive advantage and competitive moat of TME on the music and also the long-form audio IP, and also the overall IP strategy?

Thank you. 对，首先我们要要注意就是我们其实应该在这部分上我们不能完全去谈护城河，尤其当然主要是以独家这部分肯定不能以此为主，因为我们根据国家市场监管总局的规定，我们自己现在已经基本上是放跟还是保持一个非独这样的一个版权的形态。

About exclusive content, we are not in a position to talk about competitive moat because according to SAMR's rules, we cannot use exclusivity on content.

但是相比于其他家，其实我们的竞争优势是非常明显的。首先就是喜马拉雅本身仍然聚集了大量的1、2线的白领跟女性用户。

However, compared with our peers, our competitive advantage is quite clear. Ximalaya still has a lot of user legacy that covers white collar and female users in tier 1 and tier 2 cities.

所以你们可以注意到，就在喜马拉雅本身的儿童业务仍然在市场上占据了非常重要的一个地位，而且它其中的很多的故事IP都跟我们形成了很好的合作。

As you probably can see, our kids business on Ximalaya is still taking considerable market share, and especially the story part has also complement with our own business.

然后第二部分其实在整个的网络文学部分，就是因为小说仍然是就像其实Spotify的audiobook一样，就网络小说可能是我们最重要的一部分。那在这部分上我们主要还是继续跟我们的阅文集团达成一个很好的深度的战略合作，其中的它的全部作品都第一时间都可以在我们本身的平台上完成有声化以及分发。

Another part is the internet literature, especially the novels, like audiobooks. We'll continue to deepen our collaboration with China Literature, Yuewen.

All the new works will turn into audiobooks and will be efficiently distributed on our platform.

而且最近我们在跟阅文正在做的漫剧的合作，我们也相信说对于在漫剧和有声之间能够更好的去使这样的文学的IP能得到最大化的一个发展。

Recently, we're also partnering with China Literature, Yuewen, on comic plays, and we also believe that comic plays and audios can also complement with each other.

那第三块其实就是我们跟本身腾讯视频的一个深度的合作。那我们相信本身在长视频平台，比如说最近的《白月梵星》这样的一个头部的影视剧，包括《人间》，就这类只要在腾讯视频上相对比较爆火的S剧，那同样的在我们喜马拉雅也发现了它有非常大的有声书的这种消费的那个增长。

In addition, we also have a deep collaboration with Tencent Video for some long-form videos like Baiyuefanxing or Renjian, those hit shows. Once we found those hit shows on Tencent Video, especially those S plays, we also spot there is a great consumption scenarios on Ximalaya.

所以我们最近也正在推进跟腾讯视频在产品上的合作，也就是刚才说的本身在所有的热剧的排播的所有有声剧都都可以我们在我们这边上线，同时从腾讯视频完成导流。那么从我们我们这边的喜马拉雅里面所有有价值的有声内容也会同时授权给腾讯视频，以完成在让他们在那边的用户也能得到一个在听书上的一个需求满足。 With the Tencent Video for those hit shows, we can turn those into audiobooks very quickly and turn it online, and we can also have some traffic diverted from Tencent Video.

For the audio resources on Ximalaya platform, we will also license it to Tencent Video so that Tencent Video users can also listen to these audio content.

所以从一句话来解释，其实我们现在的长音频的业务仍然也是以IP为centric的这样一个业务，那么我们得意本身把我们可以把本身聚焦在本身最经典的儿童的故事和儿童故事，然后以阅文为核心的网络文学，以及跟腾讯视频所结合的S级的影视剧，仍然能在中中间去创造更好的这样一个商业化的机会。

In a nutshell, long-form audio is still IP-centric business, and we will keep a focus on classic kids stories, the internet literature from China Literature, Yuewen, and the S-level shows from Tencent Video. We believe all of this will have very good commercial outlook.

关于音乐内容生产的部分呢，其实TME也一直以来做了多年的前瞻性的部署。

About music creation, TME has also deployed many forward-looking strategies.

我们除了跟国际以及国内的很多的厂牌做一个共同的音乐的创作，以及我们也成立了不同的joint venture的分公司，加上我们公司内部的自研的工作室，我们已经发力的投入在音乐内容的创作上。

Apart from our collaboration with domestic and international labels, we co-produce a lot of art works. We also set up some joint ventures, and we also spent lots of efforts in in-house studio in music creation.

另一个很关键的就是我们必须要跟腾讯的大生态有更多的紧密的合作。当前包括腾讯游戏、腾讯视频里面很多不同的主题曲、OST，我们在过去都打造了很多不同的非常亮眼的一些的头部的歌曲。

In addition, we will also continue to forge a closer collaboration within the Tencent ecosystem with gaming, with Tencent Video, and over the years, we have generated many hit songs.

除了歌的制作以外呢，我们在过去几年也开始实现了我们自己的艺人经纪管理。我们有很多的在行业里面的著名的歌手也加入到我们的那个阵营里面。但同时间我们也跟很多的海外的公司，比如说SM Entertainment，韩国的我们也开始来培养新一代的一些新的艺人歌手，这个也是我们在打造歌手的层面，我们也投入更多的精力跟资源。

Apart from music creation, we're also entering deeper into artist or singer nurturing and artist management. For example, we partner with SM Entertainment from Korea so that it could help us better nurture more talented artists.

最后我们可以把这些非常好的歌以及歌手，再通过不同的场景，比如说帮他们主办他们的那个个人的演唱会，也有TME自己的内部IP的盛典等等，我们也可以把演出的不同的内容来打造起来。最后呢就是希望我们以一体化的那个整体来打造更长久的IP，而且这些是高品质的，而且在过去的几年里面，我们在这些方面的业务的增长已经证明了这里面的空间还是有非常大的一个发展的空间。

With song creation and singer nurturing, we can also help a lot of singers to make their own concerts, and we can also organize a lot of IP-based events. All of this will further contribute to the business growth.

With our integrated or one-stop platform, we will further nurture more high-quality IP. If you look at our business performance over the past several years, such rapid growth is already a proven record of huge potential of this business.

最终我们也希望通过这些的特权帮助我们包月业务甚至说SVIP的增长。

Ultimately, with more benefits, it will further contribute to the growth of our subscription or SVIP growth.

Thanks, management, for taking my question. My first question is related to margin.

In the second quarter, sales and marketing increase appeared to be quite modest year-over-year, even taking into consideration of Ximalaya, which was believed to entail higher sales and marketing cost ratio. Could management help us better understand the driver behind that?

What's the overall gross margin and net margin outlook in the third quarter and fourth quarter upon a full quarter consolidation of Ximalaya? My second question is related to shareholder return.

Our total cash, short and long-term deposit reached RMB44 billion at the end of second quarter and is almost 40% of our current market cap. Could management share with us your latest thought on enhancing shareholder return going forward?

Thank you.

谢谢管理层给我提问的机会。第一个问题呢是关于这个利润率的情况，包括第二季度我们可以看到整个销售的支出其实同比增长还蛮多的，即使考虑到这个喜马拉雅的合并的这个事情啊。能不能管理层跟我们分析一下背后的这个主要的驱动力到底是什么？然后给我们展望一下今年下半年，包括整个毛利和净利的一个预计情况。第二个问题呢是关于这个股东回报的，我们可以看到在截止到二季度末的话，我们账上现金已经达到了440亿人民币，这基本上占到了我们大概40%的市值。所以想问一下管理层对于现在这个股东回报我们后续有什么样的计划？ 对，我们的毛利率同比稍微降低的主要原因呢，其实主要是因为线下活动的收入增长是较快的，那么占总收入的比例较大。那么另外一方面呢，其实线下活动中的经纪类的业务增长也比较快，那么占比也逐步提高。那么同时演唱会和实体粉丝类业务积累了一个运营的一个经验，也提升了这个运营效率，那对整体的毛利率还是有一个正向影响的，所以综合下来，那同比的这个毛利率下降是比较少的。

First question about the slight decline of our GP margin is mainly due to the following reasons. Number one is our offline business is growing very rapidly, which means that it takes a bigger share of our total revenue.

Plus our offline artist brokerage business is also growing very rapidly and also taking up a bigger share of our overall revenue. Plus concerts and live performance, which also contribute positively to our GP margin.

These are why our GP margin is just declining slightly.

环比来看呢，毛利率下降的会比较多，其实纯粹是因为这个线下活动的这个收入的季节性的波动，那么Q2的占比是显著高于Q1的，那么对毛利率产生了一定的负向影响。

If we look at a quarter-over-quarter, the slight decline of GP margin is mostly the seasonal changes of the offline performance business, because the offline performance business in Q2 is greatly higher than Q1. 对，那么考虑这个喜马的这个并入呢，这个在考虑了我们的这个会计政策下的这个无形资产的摊销后呢，对整体的这个毛利率的是正向的影响。

Considering the amortization of intangible asset of Ximalaya, it has some positive impact over our GP margin.

长期来看呢，合并了喜马后呢，我们持续会进行音频和音乐的内容整合，丰富整个内容生态，那么组合好这个差异化的这个用户结构，然后提升SVIP的留存和付费转化，那么相信呢对整体的这个毛利率有一定的提升空间。

In the long run, with the consolidation of Ximalaya, we will continue to build our music plus audio platform and to have a more enriching ecosystem and to provide a more differentiated user experience, and with that, we believe we can increase the retention, conversion rate. 根据这个目前对于下半年的这个收入的这个预期的情况来看，我们预计这个整体的这个毛利率比去年同期稍微要下调。

Our projection into the second half of our revenue expectation, we project that our GP margin will be decreasing slightly year-over-year.

对。关于销售费用的问题，我可能要说一下，就是其实Q2来讲，我们相对而言其实是控制了这个销售费用的这个投入。那么整体来讲就是调整了整个渠道费用的一个策略，那么对渠道费用有更高的这个ROI的要求，减少了这个渠道费用。同时加强了与腾讯整个生态的合作，包括视频号、微信支付和游戏的，那么与视频号的合作也逐步取得一些成效，有效地有一定的提升。

About sales expenses, I would say in Q2 we have controlled the sales expenses because in general we have changed our channel expenses strategy, which means that we will seek more projects with higher ROI. In addition, we're also strengthening our collaboration within the Tencent ecosystem, including Tencent Video, Tencent Pay, and Tencent Gaming.

As you can see in our collaboration with Tencent Video has already helped us increase the traffic and conversion.

那合并喜马以后呢，其实6月份其实喜马几乎是停投的，那我们将集团中台的能力逐步适配到喜马，那么形成更优的投放模型。从7月起呢，会在集团相同的ROI要求的前提下逐步恢复投放。

With the consolidation of Ximalaya, basically the input in June has already suspended, but with the technology and platform convergence, and we have resumed the expanding for Ximalaya, but with the same ROI standard since July.

对，我们不会进行大水漫灌式的烧钱去做营销，我们将持续的投入优质内容，精细化的这个推广策略，聚焦核心价值用户和生态优势，稳固付费用户的基本盘。预计全年的销售费用和S&M都会有合理的增长，主要是含了喜马的一些支出。那么运营费率呢相比25年有小幅的提升，加上贷款利息支出增加，那么净利会有小幅的承压，预计全年的经调整的EBITDA会有小幅提升。

We will not just spend broadly in marketing, and we will fine-tune our strategy in marketing and to do more targeted and stay focused on our ecosystem and to try to tap more value from our users. For the whole year, our sales expenses will go up a little bit, and operating expenses will slightly go up.

Considering the loans, our net margin for the whole year will go down slightly, and EBITDA will edge up a little bit.

关于股东回报上，我们当前有一个10亿美元的股票的回购计划，而且在第二个季度呢我们总计完成了金额达到4亿美元的那个股票的回购。

About shareholder return, currently we're still under that $1 billion shareholder return program. In Q2 alone, we've already completed $400 million USD share buyback.

管理层当前是对整个公司的长期价值呢是非常有信心的，所以我们也会在当前除了完成我们剩余的那个股票的回购的计划之后，我们也会积极的去准备新一轮的回购计划，我们目标就是以不同的模式可以提高股东的回报作为我们的目的。 Management is very confident on long-term future of the company.

Apart from finishing the rest of the previous share buyback program, we are also preparing for another round of the share buyback. We will try to use different approach to increase shareholder return.

Thank you.

Thank you.