Company Reports

Cloud Music has built a strong position as China's second-largest music streaming platform by competing on community rather than catalog. The strategy is a deliberate response to the firm's licensing disadvantage versus Tencent Music, and we expect it to maintain market shares over the next five years.

Cloud Music has built a strong position as China's second-largest music streaming platform by competing on community rather than catalog. The strategy is a deliberate response to the firm's licensing disadvantage versus Tencent Music, and we expect it to maintain market shares over the next five years.

NetEase Cloud Music’s first-half 2026 revenue grew 5%, as higher subscriber numbers were partly offset by a lower average subscription price. Core operating profit fell 7% on an 80% jump in marketing spending. Shares dropped 15% following the release.

A QuestMobile report shows ByteDance’s Soda Music reaching 156 million monthly active users, surpassing NetEase Cloud Music for the first time to become China’s third-largest music app. Cloud Music's share price has roughly halved over the past year as investors price in lasting market share losses.

Cloud Music has built a strong position as China's second-largest music streaming platform by competing on community rather than catalog. The strategy is a deliberate response to the firm's licensing disadvantage versus Tencent Music, and we expect it to maintain market shares over the next five years.

Cloud Music reported a 5% year-on-year revenue growth in the fourth quarter of 2025 and a 36% jump in operating profit for the second half of 2025. However, the stock sold off due to the absence of shareholder returns initiatives and persistent concerns over Soda Music’s entry into the market.

We believe the music streaming market in China is evolving beyond commodity status. For hundreds of millions of Chinese consumers, music increasingly represents a deeply personal and emotional experience, enriched by seamless discovery, curated playlists, and unique digital community experiences. NetEase Cloud Music's differentiated strategy, combining scale, data-driven personalization, and powerful network effects, positions it well to capture a greater share of the music value chain.

Recent weakness in Chinese music streaming stocks, Tencent Music and NetEase Cloud Music, has been driven by investor anxiety over a new competitive threat, Soda Music, a streaming platform backed by ByteDance's very popular short-form video app Douyin.

NetEase Cloud Music's first‑half music subscription revenue rose 15% year on year. However, total revenue growth was tempered by a 43% decline in livestreaming, reflecting proactive adjustments to that business. Operating profit increased 41%.

We believe the music streaming market in China is evolving beyond commodity status. For hundreds of millions of Chinese consumers, music increasingly represents a deeply personal and emotional experience, enriched by seamless discovery, curated playlists, and unique digital community experiences. NetEase Cloud Music's differentiated strategy, combining scale, data-driven personalization, and powerful network effects, positions it well to capture a greater share of the music value chain.

Music is playing an increasingly important role in the daily lives of Chinese consumers. Leading music streaming platforms, Tencent Music and NetEase Cloud Music, continue to demonstrate strong pricing power, high user stickiness, and growing operating leverage.

We believe the music streaming market in China is evolving beyond commodity status. For hundreds of millions of Chinese consumers, music increasingly represents a deeply personal and emotional experience, enriched by seamless discovery, curated playlists, and unique digital community experiences. NetEase Cloud Music's differentiated strategy, combining scale, data-driven personalization, and powerful network effects, positions it well to capture a greater share of the music value chain.

We have updated our view on NetEase Cloud Music, China's second-largest music streaming platform.

We believe the music streaming market in China is evolving beyond commodity status. For hundreds of millions of Chinese consumers, music increasingly represents a deeply personal and emotional experience, enriched by seamless discovery, curated playlists, and unique digital community experiences. NetEase Cloud Music's differentiated strategy, combining scale, data-driven personalization, and powerful network effects, positions it well to capture a greater share of the music value chain.

Cloud Music is the second-largest music streaming platform in China, with an estimated 200 million monthly active users and 50 million subscribers. While the platform offers free streaming for some tracks, it places the most popular ones behind a paywall, requiring a subscription to access them.

NetEase Cloud Music reported strong second-half 2024 earnings, with operating profit rising more than 150% year on year.

Cloud Music is the second largest music streaming platform in China, with over 180 million monthly active users, about one third that of Tencent Music Entertainment’s, or Tencent Music. As exclusive licensing practices have been prohibited by China’s antitrust laws, we believe Cloud Music should now grow its content through direct licensing from music labels at costs lower than sublicensing from Tencent Music. This could allow it to grow subscribers rapidly and gain market share in the music streaming industry.

2024 was a strong year for the Chinese music streaming industry, with share prices for both Tencent Music and Cloud Music rising by more than 20%. This performance was fueled by increasing subscribers, higher subscription prices, and improving profitability.

Cloud Music’s first-half 2024 earnings beat our expectations, even as the company strategically scaled back some of its livestreaming services to manage potential regulatory risks. Although we now expect further decline in livestreaming revenue as the phase-out continues, this is offset by a significant improvement in margins in the first half. Overall, we maintain Cloud Music’s fair value at HKD 153. Shares are very undervalued, trading at 13 times our estimated earnings for 2024.

We maintain our fair value estimate for Cloud Music following its parent company, NetEase's recent earnings release, which provided insights into Cloud Music's financial performance for the first quarter of 2024. Cloud Music only publishes financial reports on an interim basis. The revenue for Cloud Music increased by 4% year over year, driven by an acceleration in music subscription growth. However, this was partly offset by a decline in live streaming-related revenue.