You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—3.D. Risk Factors” and elsewhere in this annual report. 5.A. Operating Results General Factors Affecting Our Results of Operations Our business and results of operations are affected by several general factors affecting China’s music and audio entertainment industry, which include the evolving regulatory environment, competition in China’s music and audio entertainment industry, and general economic, political, demographic and business conditions in China and globally, among others. Unfavorable changes in any of these general conditions could negatively affect demand for our services and materially and adversely affect our results of operations. Tencent Music Entertainment Group is a Cayman Islands holding company. It does not engage in operations itself but rather conducts its operations through its PRC subsidiaries, as well as the VIEs through certain contractual arrangements entered into with the VIEs. Though the Foreign Investment Law does not explicitly classify such contractual arrangements as a form of foreign investment, the definition of “foreign investment” under such law is relatively broad and contains a catch-all provision so that foreign investment includes “investments made by foreign investors in China through other means defined by other laws or administrative regulations or provisions promulgated by the State Council,” without further elaboration on the meaning of “other means.” Uncertainty remains on how these rules will be interpreted and implemented and whether the Group’s corporate structure could be found to violate current foreign investment rules as we adopt the contractual arrangements with the VIEs to operate certain businesses in which foreign investors are prohibited from or restricted in investing. Furthermore, if future legislations mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face uncertainties as to whether we can complete such actions in a timely manner, or at all. If we fail to take appropriate and timely measures to comply with any of these or similar regulatory compliance requirements, the Group’s current corporate structure, corporate governance and business operations, as well as the Group’s ability to consolidate the VIEs’ results in the Group’s consolidated financial statements, could be materially and adversely affected. For more details, see “Item 3. Key Information—D. Risk Factors— Risks Related to the Group’s Corporate Structure— Uncertainties remain as to the interpretation and implementation of the Foreign Investment Law of the PRC and how it may impact the viability of the Group’s current corporate structure, corporate governance and business operations.” Specific Factors Affecting Our Results of Operations Our ability to engage our large user base and further increase their engagement level We generate revenues primarily through membership sales, advertising services, and virtual gifts, which are closely tied to both the size of our user base and the level of user engagement. Given our already large base of MAUs, our strategy has increasingly focused on enhancing user engagement. Our ability to maintain and grow our paying user base and further increase engagement depends on a number of factors, including our ability to, among other things (i) expand and diversify our content offerings, (ii) offer innovative features and compelling user experience, (iii) encourage users to utilize multiple services across our platform, (iv) enhance user interaction and community features, and (v) strengthen our brand reputation. We adopt a holistic approach to operating our online music services and social entertainment services to seamlessly integrate both services. We leverage our strong product features, content recommendations, and technological capabilities to create a cohesive experience for users. By integrating listening and other interactive functionalities within a unified platform, we encourage user migration across services and increase the depth and frequency of user interaction. Our recommendation algorithms and technology infrastructure also support seamless cross-service engagement, enabling users to discover complementary content and features. This integrated approach supports user retention, deepens our engagement with users, and continuously enhances user engagement across our services. Our ability to strengthen monetization and drive quality growth Our results of operations depend on our ability to deepen monetization from our massive user base, by sustaining growth of paying users, enhancing spending per paying user, and other diverse monetization approaches. 111 The table below sets forth certain operating metrics—MAUs, paying users, paying ratio, and monthly ARPPU—for our online music services for the periods indicated. These figures have not been adjusted to eliminate duplicate access of different products and services by the same user, if any, during any given period. For the Year Ended December 31, 2023 2024 2025 MAUs (in millions) 589 570 547 Paying users (in millions) 100.9 117.6 125.1 Paying ratio 17.1 % 20.6 % 22.9 % Monthly ARPPU(1) (RMB) 10.0 10.8 11.8 Notes: (1)The revenues used to calculate the monthly ARPPU of online music services include revenues from subscriptions only. The revenues from subscriptions for the periods indicated were RMB12,096 million, RMB15,227 million and RMB17,660 million (US$2,525 million), respectively. As music consumption habits in China continue to mature, users are now more open and willing to pay for copyrighted music and its associated services. With our deep commitment to user value, we have built a comprehensive, multi-tiered membership system that offers various options for users with different needs and preferences. See “Item 4. Information on the Company — 4.B. Business Overview — How We Generate Revenues — Online Music Services — Music subscription.” We continue to shape 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, expansive content privileges, the number of paying users for our online music services reached 127.4 million in the fourth quarter of 2025. In the foreseeable future, we intend to continue our focus on monetization of our online music services, such as music subscription, advertising services, and other new growth businesses. At the same time, we are dedicated to serving our core users with social entertainment services, which are integral to our music entertainment ecosystem. By taking advantage of advanced technologies, such as large language models (LLMs), and fostering constant innovation, we aim to offer more interactive products and deliver engaging experiences for our users. Our ability to continue to monetize our user base is affected by several factors, such as our ability to enhance user engagement, our ability to cultivate users’ willingness to pay for online music services and social entertainment services, as well as our ability to integrate more monetization models into the overall user experience on our platform. Monetization of our user base is also affected by our ability to optimize our pricing strategy and to explore new monetization opportunities by leveraging our comprehensive content offerings, vast user base and strong relationships with music labels and other content providers. As we explore additional monetization opportunities, such as scaling up our revenue contribution from artist-related merchandise and offline performance, our cost of revenues may increase, especially during early ramp-up phase of launching new monetization initiatives, with limited impacts to gross profit margin potentially. Our ability to monetize may also be affected by macroeconomic factors affecting China’s economy in general and its music and audio entertainment industry in particular. See “Item 3. Key Information — 3.D. Risk Factors — Risks Related to Our Business and Industry — We face risks related to accidents, disasters and public health challenges in China and globally.” Our ability to continue to deliver diverse, attractive and relevant content offerings We believe that users are attracted to our platform and choose to pay for our services for the diverse and attractive content we offer. Accordingly, we have focused our content strategies on offering a wide range of content catering to users’ tastes and preferences, as well as improving our platform, including our curation and recommendation capabilities. We currently have a comprehensive content library in China across a wide range of content formats, including songs, karaoke songs, live streaming of music performances, recorded video and audio content, as well as reviews and articles. Our continued success largely depends on our ability to stay abreast of users’ evolving needs and preferences and dynamics in the entertainment industry. We seek to identify trendsetting and potentially popular content, which in turn allows us to provide more comprehensive offerings. We intend to continue to invest in and enrich our content portfolio. We will continuously invest in original content production to meet user demands for diverse forms of music entertainment. We will also continue to provide our indie musicians with useful tools and collaborative opportunities to realize their full potential while differentiating our content offerings. 112 Our ability to enhance returns on our spending on content Our ability to enhance returns on our spending on content depends on our ability to identify new content and effectively monetize our content while maintaining our commitment to copyright protection. Our service costs mainly comprise: (i) royalties paid to music labels and other content partners and our in-house production costs for content used to support both our online music services and social entertainment services; and (ii) revenues shared with performers and/or their talent agencies and other content providers which are primarily associated with our social entertainment services. Service costs have historically accounted for the majority of our cost of revenues as we have made substantial investments in building and enriching our portfolio of licensed content and attracting performers to perform on our platform. Our results of operations and our ability to sustain profitability may also be affected by our obligations to make payments for royalties to the licensors under our license agreements. See “Item 4. Information on the Company — 4.B. Business Overview — Our Content — Content Sourcing Arrangements” for more information about the pricing structure of our licensed content. We are committed to protecting music copyright, and our leading role in China’s music copyright protection efforts has made us a preferred partner for major domestic and international music labels and other content partners. This has helped us maintain long-term collaborative relationships with our content partners, which, in turn, enables us to source content on commercially reasonable terms, unlock greater value from music IPs, create new opportunities for artists and address a larger market. We believe that our collaborative relationships with content partners and our diversified monetization models enable us to maintain and enhance returns on content spending without compromising our commitment to copyright protection. Key Components of Results of Operations Revenues We derive our revenues from (i) online music services; and (ii) social entertainment services and others. The following table sets forth a breakdown of our revenues, in absolute amounts and as percentages of total revenues, for the periods indicated. For the Year Ended December 31, 2023  2024  2025 RMB %  RMB  %  RMB  US$  % (in millions, except for percentages) Revenues Online music services 17,325 62.4 21,742 76.6 26,726 3,822 81.2 Social entertainment services and others 10,427 37.6 6,659 23.4 6,176 883 18.8 Total revenues 27,752 100.0 28,401 100.0 32,902 4,705 100.0 Online music services. We generate revenues from our online music services primarily from music subscriptions, namely sale of subscription packages with various privileges. We have built a multi-tiered membership, including ads membership, standard membership, and SVIP membership. In 2023, 2024 and 2025, revenue from music subscriptions was RMB12,096 million, RMB15,227 million and RMB17,660 million (US$2,525 million), respectively. As we continue to expand our online music services, we successfully diversify our revenue streams, and expanded our other non-subscription revenue. For instance, we also generate online music revenues from: (i) offering display and performance-based advertising solutions with pricing arrangements based on various factors, including the form and size of the advertisements, level of sponsorship and popularity of the content, (ii) offline performances and artist-management services; (iii) content licensing; (iv) sales of artist-related merchandise; (v) providing long-form audio-related services, including subscription packages to access our audio content; (vi) sales of digital albums. We expect our revenues from online music services to increase in both absolute amount and as a percentage of our total revenues in the foreseeable future. Social entertainment services and others. We generate our social entertainment and other services revenues through live streaming, online karaoke and certain other services. We generate revenues from live streaming and online karaoke services primarily through sales of virtual gifts, with a portion of these revenues typically shared with the content creators, including live streaming performers and their agents, based on an agreed-upon percentage. We also generate a growing portion of the revenues from offering display and performance-based advertising solutions on our platform and selling premium memberships to our users. We expect that our revenue from social entertainment services and others will remain sizable in the foreseeable future. See also “Item 3. Key Information - 3.D. Risk Factors - Risks Related to Our Business and Industry - Our business operations may be adversely affected by 113 the heightened regulatory oversight and scrutiny on live streaming platforms and performers.” We are striving to increase our competitive edge through ongoing product innovations and expanding into new areas of social entertainment such as interactive product offerings. Our chief operating decision maker has determined that we have only one reportable segment. Cost of revenues The following table sets forth the components of our cost of revenues, in absolute amounts and as percentages of total cost of revenues, for the periods indicated. For the Year Ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in millions, except for percentages) Cost of revenues Service costs 14,176 78.9 11,974 73.1 11,349 1,623 61.8 Other cost of revenues 3,781 21.1 4,402 26.9 7,018 1,004 38.2 Total cost of revenues 17,957 100.0 16,376 100.0 18,367 2,626 100.0 Our cost of revenues primarily includes service costs, which mainly comprise (i) content costs, which primarily consist of royalties paid to music labels and other content partners and our in-house production costs. Such costs are used to support both our online music services and social entertainment services; (ii) fees paid to content creators pursuant to revenue sharing arrangements associated with our social entertainment services, including live streaming performers, their agencies and other users who perform on our platform; and (iii) content delivery costs relating primarily to server, cloud services and bandwidth costs paid to telecommunications carriers and other related service providers which are used to support both our online music services and social entertainment services. Other cost of revenues mainly comprise (i) costs related to offline performances, which primarily consist of organization and production costs of offline events; (ii) advertising costs, which consist primarily of commissions paid to advertising agencies and other advertising costs; (iii) payment channel fees, which consist primarily of fees paid to online payment gateways; (iv) employee benefit expenses, which consist primarily of the salaries and other benefits paid to our employees supporting the operations of our platform; and (v) costs associated with sales of artist-related merchandise; and (vi) other costs. We are committed to continually investing in high-quality content. Our content is critical to expanding our product offerings, attracting users and driving monetization for our online music and social entertainment services over time. We expect that our cost of revenues will increase in absolute amount in the foreseeable future along with revenue growth. Specifically, we expect content costs to rise as we continuously broaden our copyrighted content offering and increase original content creation. Meanwhile, ongoing cost-control initiatives and cost efficiency management will help improve returns on our service costs in the foreseeable future. Operating expenses Our ongoing effort is to enhance the cost-effectiveness of our operating expenses. The following table sets forth a breakdown of our operating expenses, in absolute amounts and as percentages of total operating expenses, for the periods indicated. For the Year Ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in millions, except for percentages) Operating expenses Selling and marketing expenses 897 17.9 865 18.5 941 135 19.4 General and administrative expenses(1) 4,121 82.1 3,811 81.5 3,916 560 80.6 Total operating expenses 5,018 100.0 4,676 100.0 4,857 695 100.0  Note: (1)Includes R&D expenses of RMB2,525 million, RMB2,280 million and RMB2,317 million (US$331 million) in 2023, 2024 and 2025, respectively. 114 Selling and marketing expenses. Our selling and marketing expenses consist primarily of (i) content promotion expenses and channel spending; and (ii) salaries and other benefits paid to our sales and marketing personnel. We will maintain ROI-focused approach and seek to continually enhance the cost-effectiveness of our selling and marketing expenses while incrementally increasing our investment in areas with sustained growth prospects. General and administrative expenses. Our general and administrative expenses consist primarily of (i) R&D expenses, including salaries and other benefits paid to our R&D personnel; and (ii) salaries and other benefits paid to our general and administrative personnel; (iii) amortization of intangible assets resulting from acquisitions; and (iv) fees and expenses associated with the legal, accounting and other professional services. We will continue to improve our operational efficiencies while continuously investing in research and development to expand our competitive advantages in product and technology innovations. Other gains, net Our other gains, net primarily include gain on deemed disposal, dividends from investments and government grants and tax rebates. We had other gains, net, of RMB230 million, RMB165 million and RMB2,632 million (US$376 million) in 2023, 2024 and 2025, respectively. Taxation We had income tax expense of RMB825 million, RMB1,603 million and RMB1,924 million (US$275 million) in 2023, 2024 and 2025, respectively. We are subject to various rates of income tax under different jurisdictions. The following summarizes major factors affecting our applicable tax rates in the Cayman Islands, Hong Kong and the PRC. Cayman Islands We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains in the Cayman Islands. Additionally, upon payment of dividends by us to our shareholders, no Cayman Islands withholding tax will be imposed. Hong Kong Our subsidiaries in Hong Kong, including Tencent Music Entertainment Hong Kong Limited, our wholly-owned subsidiary, are subject to Hong Kong profits tax on their taxable income generated from the operations in Hong Kong at a uniform tax rate of 16.5%. Under the current tax laws of Hong Kong, our subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends. Dividends from Tencent Music Entertainment Hong Kong Limited is not subject to Hong Kong profits tax. PRC Under the Corporate Income Tax (“CIT”) Law in the PRC, foreign invested enterprises and domestic enterprises are subject to a unified CIT rate of 25%, except for available preferential tax treatments, including tax concession for enterprise approved as “High and New Technology Enterprise” (“HNTE”) “Software Enterprise” (“SE”) and “Key Software Enterprise” (“KSE”), and enterprise established in certain special economic development zones. Qualified HNTE is eligible for a preferential tax rate of 15%, qualified SE is entitled to an exemption from income tax for the first two years, commencing from the end of the first profitable year, and a reduction of half tax rate for the following three years and qualified KSE is eligible for a preferential tax rate of 10%. Our PRC subsidiaries and the VIEs in China are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the PRC CIT Law, which became effective on January 1, 2008, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. Beijing Kuwo, Yeelion Online and TME Tech Shenzhen have been recognized as HNTE by relevant government authorities and were therefore qualified for a preferential tax rate of 15% for the years ended December 31, 2023, 2024 and 2025. Guangzhou Fanxing Entertainment Information Technology Co., Ltd. (“Fanxing”), a subsidiary of the Group, was recognized as HNTE by relevant government authorities and was therefore qualified for a preferential tax rate of 15% for the years ended December 31, 2023. Guangzhou Shiyinlian Software Technology Co., Ltd. (“Shiyinlian”) was recognized as HNTE by relevant government authorities for the first time in December 2022 and was therefore qualified for a preferential tax rate of 15% for the years ended December 31, 2022, 2023 and 2024. It was recognized for the second time as HNTE by relevant government authorities in December 2025 and will therefore qualify for a preferential tax rate of 15% for the years ended December 31, 2025, 2026 and 2027. 115 Certain subsidiaries of the Group are entitled to other tax concession, mainly include the preferential tax rate of 15% applicable to some subsidiaries located in certain area of PRC upon fulfillment of certain requirements of the respective local government. Furthermore, certain subsidiaries of the Group are subject to other preferential tax treatment for certain reduced tax rates ranging from 5% to 9%. As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Tencent Music Entertainment Hong Kong Limited. The PRC EIT Law and its implementing rules provide that dividend paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between the Chinese mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or SAT Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC EIT Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information — 3.D. Risk Factors — Risks Related to Doing Business in China — We or the VIEs may be subject to domestic and other tax obligations and we may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” In December 2021, the Organization for Economic Co-operation and Development published Pillar Two model rules, enabling jurisdictions to enact domestic tax laws to implement a globally agreed common approach. These rules apply to multinational groups with annual revenue of EUR750 million or more in at least two of the four fiscal years preceding the tested fiscal year, potentially including Tencent, the Group’s ultimate holding company. As a result, the Group may be subject to a top-up tax on profits in jurisdictions where the effective tax rate falls below a minimum of 15% according to the Pillar Two model rules. As of December 31, 2025, the Group mainly operates in Chinese Mainland and Hong Kong. Pillar Two legislation has been effective in Hong Kong since January 1, 2025 and the current tax exposure for the year ended December 31, 2025 is immaterial. While Pillar Two legislation is not yet enacted or substantively enacted in Chinese Mainland as at December 31, 2025, it is estimated that the Group’s income tax would not be materially different had such legislation been in effect for the year ended December 31, 2025. The Group will continue assessing the Pillar Two tax exposure and the impacts on its consolidated financial statements accordingly. Regarding deferred income tax accounting, the Group has applied the exception to recognizing and disclosing deferred income tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023. Results of Operations The following table summarizes our consolidated results of operations and as percentages of total revenues for the periods presented. For the Year Ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in millions, except for percentages) Revenues Online music services 17,325 62.4 21,742 76.6 26,726 3,822 81.2 Social entertainment services and others 10,427 37.6 6,659 23.4 6,176 883 18.8 Total revenues 27,752 100.0 28,401 100.0 32,902 4,705 100.0 Cost of revenues(1) (17,957 ) (64.7 ) (16,376 ) (57.7 ) (18,367 ) (2,626 ) (55.8 ) Gross profit 9,795 35.3 12,025 42.3 14,535 2,078 44.2 Operating expenses Selling and marketing expenses(1) (897 ) (3.2 ) (865 ) (3.0 ) (941 ) (135 ) (2.9 ) General and administrative expenses(1) (4,121 ) (14.8 ) (3,811 ) (13.4 ) (3,916 ) (560 ) (11.9 ) Total operating expenses (5,018 ) (18.1 ) (4,676 ) (16.5 ) (4,857 ) (695 ) (14.8 ) Interest income 1,052 3.8 1,196 4.2 1,054 151 3.2 Other gains, net 230 0.8 165 0.6 2,632 376 8.0 Operating profit 6,059 21.8 8,710 30.7 13,364 1,911 40.6 Share of net profit of investments accounted for using equity method 127 0.5 96 0.3 42 6 0.1 116 For the Year Ended December 31, 2023 2024 2025 RMB % RMB % RMB US$ % (in millions, except for percentages) Finance cost(2) (141 ) (0.5 ) (94 ) (0.3 ) (129 ) (18 ) (0.4 ) Profit before income tax 6,045 21.8 8,712 30.7 13,277 1,899 40.4 Income tax expense (825 ) (3.0 ) (1,603 ) (5.6 ) (1,924 ) (275 ) (5.8 ) Profit for the year 5,220 18.8 7,109 25.0 11,353 1,623 34.5 Note: (1)Share-based compensation expenses were allocated as follows: For the Year Ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions) Cost of revenues 57 68 91 13 Selling and marketing expenses 36 30 33 5 General and administrative expenses 577 498 545 78 Total 670 596 669 96 (2)Finance cost mainly comprises interest on notes we issued and lease liabilities, and foreign exchange gains or losses, net. Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Our revenues increased by 15.8% from RMB28,401 million in 2024 to RMB32,902 million (US$4,705 million) in 2025. Online music services Our revenues generated from online music services increased by 22.9% from RMB21,742 million in 2024 to RMB26,726 million (US$3,822 million) in 2025, mainly driven by an increase in music subscription revenues of RMB2,433 million (US$348 million) in 2025, supplemented by growth in revenues from offline performances and artist-management services, and advertising services of RMB923 million (US$132 million). Increased revenues from artist-related merchandise also contributed to the growth in revenues from online music services. Our revenues generated from music subscriptions increased by 16.0% from RMB15,227 million in 2024 to RMB17,660 million (US$2,525 million) in 2025. The rapid growth was mainly driven by our continuous expansion of membership privileges, such as early access to offline performances, artist-related merchandise, and a wide range of premium offerings. The year-over-year increase in revenues from advertising was primarily due to more diversified product portfolio and innovative ad formats, such as ad-supported mode. Social entertainment services and others Our revenues generated from social entertainment services and others decreased by 7.3% from RMB6,659 million in 2024 to RMB6,176 million (US$883 million) in 2025. The decrease in revenue was mainly due to adjustments made to certain live-streaming interactive functions and more stringent compliance procedures implemented. Cost of revenues Our cost of revenues increased by 12.2% from RMB16,376 million in 2024 to RMB18,367 million (US$2,626 million) in 2025, primarily attributable to increased costs related to offline performances, costs of artist-related merchandise, and advertising costs. Meanwhile, service costs decreased by 5.2% from RMB11,974 million in 2024 to RMB11,349 million (US$1,623 million) in 2025. The declined revenues from social entertainment services led to lower revenue sharing fees, which was the primary reason for the overall decrease in service costs, while our content costs of royalties increased year-over-year. Gross profit As a result of the foregoing, our gross profit increased by 20.9% from RMB12,025 million in 2024 to RMB14,535 million (US$2,078 million) in 2025. Our gross margin increased from 42.3% in 2024 to 44.2% in 2025. This increase in gross margin was 117 primarily due to increased revenues from music subscriptions and advertising services, along with a lower revenue sharing ratio for social entertainment services, partly offset by increased revenues from offline performances and artist-related merchandise. Operating expenses Our operating expenses increased by 3.9% from RMB4,676 million in 2024 to RMB4,857 million (US$695 million) in 2025. Selling and marketing expenses Our selling and marketing expenses increased by 8.8% from RMB865 million in 2024 to RMB941 million (US$135 million) in 2025. The increase was primarily due to higher content promotion expenses and channel spending. General and administrative expenses Our general and administrative expenses increased by 2.8% from RMB3,811 million in 2024 to RMB3,916 million (US$560 million) in 2025 primarily due to growth in employee-related expenses. Interest income Our interest income was RMB1,054 million (US$151 million) in 2025, as compared to RMB1,196 million in 2024. Other gains, net Our other gains, net, were RMB2,632 million (US$376 million) in 2025, as compared to RMB165 million in 2024. The increase was mainly attributable to the gain of RMB2,373 million (US$339 million) on deemed disposal of an associate. Operating profits As a result of the foregoing, our operating profit for the year increased by 53.4% to RMB13,364 million (US$1,911 million) in 2025 from RMB8,710 million in 2024. Operating margin increased to 40.6% in 2025 from 30.7% in 2024. Finance cost Our finance cost was RMB129 million (US$18 million) in 2025, as compared to RMB94 million in 2024. The increase was primarily due to the foreign exchange losses recognized in 2025 versus foreign exchange gains in 2024, which arose from the fluctuation of exchange rate. Income tax expense We had an income tax expense of RMB1,603 million and RMB1,924 million (US$275 million) million in 2024 and 2025, respectively. The increase of income tax expense was primarily due to the growth of profit before tax. Profit for the year As a result of the foregoing, our profit for the year increased from RMB7,109 million in 2024 to RMB11,353 million (US$1,623 million) in 2025. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 For a detailed description of the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, see “Item 5. Operating and Financial Review and Prospects — 5.A. Operating Results — Results of Operations — Year Ended December 31, 2024 Compared to Year Ended December 31, 2023” of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission on April 23, 2025. Non-IFRS Financial Measure We use adjusted profit for the year, which is a Non-IFRS financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We believe that adjusted profit for the year helps identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in our profit for the year. We believe that adjusted profit for the year provides useful information about our results of operations, enhances the overall understanding of our past 118 performance and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Adjusted profit for the year should not be considered in isolation or construed as an alternative to operating profit, profit for the year or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review adjusted profit for the year and the reconciliation to its most directly comparable IFRS measure. Adjusted profit for the year presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. Adjusted profit for the year represents profit for the year excluding amortization of intangible and other assets arising from acquisitions, share-based compensation, gains/losses from investments, fair value change on puttable shares, and income tax effects. The table below sets forth a reconciliation of our profit for the year to adjusted profit for the years indicated. For the Year Ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions, except for share and per share data) Profit for the year 5,220 7,109 11,353 1,623 Adjustments: Amortization of intangible and other assets arising from acquisitions(1) 445 440 386 55 Share-based compensation 736 681 680 97 (Gains)/losses from investments(2) (7 ) 110 (2,285 ) (327 ) Income tax effects(3) (171 ) (204 ) (210 ) (30 ) Adjusted profit for the year (Non-IFRS financial measure) 6,223 8,136 9,924 1,419 Attributable to: Non-IFRS equity holders of the Company 5,923 7,671 9,588 1,371 Non-controlling interests 300 465 336 48 IFRS Earnings per share for Class A and Class B ordinary shares Basic 1.58 2.15 3.60 0.52 Diluted 1.55 2.12 3.56 0.51 Earnings per share for Class A and Class B ordinary shares (Non-IFRS financial measure) Basic 1.90 2.49 3.13 0.45 Diluted 1.87 2.45 3.08 0.44 Shares used in earnings per Class A and Class B ordinary share computation Basic 3,121,653,686 3,084,230,029 3,067,255,442 3,067,255,442 Diluted 3,168,386,031 3,130,861,720 3,108,803,728 3,108,803,728 IFRS Earnings per ADS (2 Class A shares equal to 1 ADS) Basic 3.15 4.31 7.21 1.03 Diluted 3.11 4.24 7.11 1.02 Earnings per ADS (Non-IFRS financial measure)(4) Basic 3.79 4.97 6.25 0.89 Diluted 3.74 4.90 6.17 0.88 ADS used in earnings per ADS computation Basic 1,560,826,843 1,542,115,015 1,533,627,721 1,533,627,721 Diluted 1,584,193,016 1,565,430,860 1,554,401,864 1,554,401,864 Notes: (1)Represents the amortization of identifiable assets, including intangible assets such as domain name, trademark, copyrights, supplier resources, corporate customer relationships and non-compete agreement etc., and fair value adjustment on music content (i.e., signed contracts obtained for the rights to access to the music content for which the amount was amortized over the contract period), resulting from business acquisitions or combination. (2)Includes the net losses/gains on deemed disposals/disposals of investments, fair value changes arising from investments, impairment provision of investments and other expenses in relation to equity transactions of investments. (3)Represents the income tax effects of Non-IFRS adjustments. (4)Each ADS represents two of our Class A ordinary shares. 119 Recent Accounting Pronouncements For detailed discussion on recent accounting pronouncements, see Note 2.2 to the consolidated financial statements of Tencent Music Entertainment Group included elsewhere in this annual report. 5.B. Liquidity and Capital Resources Cash Flows and Working Capital Our principal sources of liquidity have been cash generated from operating activities. As of December 31, 2025, we had RMB8,470 million (US$1,211 million) in cash and cash equivalents. Our cash and cash equivalents consist primarily of bank deposits and highly liquid investments, which have original maturities of three months or less when purchased. In addition, we had RMB 29,573 million (US$4,229 million) in term deposits as of December 31, 2025. We believe that our current cash, cash equivalents, term deposits and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months. On December 17, 2019, we announced a share repurchase program under which we may repurchase up to US$400 million of our Class A ordinary shares in the form of ADSs pursuant to relevant SEC rules during a twelve-month period commencing on December 15, 2019 (the “2019 Share Repurchase Program”). On March 28, 2021, we announced another share repurchase program under which we may repurchase up to US$1 billion of our Class A ordinary shares in the form of ADSs pursuant to the relevant SEC rules (the “2021 Share Repurchase Program”). On March 21, 2023, our board of directors authorized another share repurchase program under which we may repurchase up to US$500 million of our Class A ordinary shares in the form of ADSs during a two-year period commencing from March 2023 (the “2023 Share Repurchase Program”). On March 17, 2025, our board of directors authorized the 2025 Share Repurchase Program under which we may repurchase up to US$1 billion of our Class A ordinary shares, including in the form of ADSs, during a two-year period commencing on March 21, 2025 (the “2025 Share Repurchase Program”). As of March 31, 2026, we have repurchased ADSs from the open market for a total of approximately US$19 million under the 2019 Share Repurchase Program, approximately US$1 billion under the 2021 Share Repurchase Program, and US$500 million under the 2023 Share Repurchase Program. We may repurchase additional shares depending on market conditions. On September 3, 2020, we issued an aggregate of US$300 million senior unsecured notes due in 2025 (the “2025 Notes”), with annual interest rate of 1.375%, and an aggregate of US$500 million senior unsecured notes due in 2030 (the “2030 Notes”), with annual interest rate of 2.000%. The net proceeds from the notes offering were used for general corporate purposes. The 2030 Notes remained outstanding as of the date of this annual report. We are not subject to any financial covenants or other significant restrictions under these notes. In 2025, we paid an aggregate of US$14 million in interest payments related to these notes. In the first quarter of 2026, a wholly-owned subsidiary of the Group entered into loan facility agreements with several banks, pursuant to which RMB3.0 billion principal amount has been drawn down, with a term of 360 days to 5 years and interest payable quarterly or semi-annually, and the interest rate is based on the Loan Prime Rate published by the National Interbank Funding Center or at fixed rate. The net proceeds from the facility will be used for general corporate purposes. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. As a holding company with no material operations of our own, we conduct our operations primarily through our PRC subsidiaries and the VIEs in China. We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries in China through capital contributions or loans, subject to the approval of government authorities and limits on the amount of capital contributions and loans. In addition, our subsidiaries in China may provide Renminbi funding to the VIEs only through entrusted loans. See “Item. 3. Key Information — 3.D. Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and regulatory control of currency conversion may delay or prevent us from using the proceeds of our financing activities to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business” and “Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.” The ability of our subsidiaries in China to make dividends or other cash payments to us is subject to various restrictions under PRC laws and regulations. See “Item. 3. Key Information — 3.D. Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us and any tax we are required to pay could have a material and adverse effect on our ability to conduct our business” and “Item. 3. Key Information — 3.D. Risk Factors — Risks Related to Doing Business in China — 120 We or the VIEs may be subject to domestic and other tax obligations and we may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” The following table presents our selected consolidated cash flow data for the periods indicated. For the Year Ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions) Selected Consolidated Cash Flow Data: Net cash provided by operating activities 7,337 10,275 10,231 1,463 Net cash used in investing activities (1,863 ) (6,818 ) (10,227 ) (1,462 ) Net cash used in financing activities (1,538 ) (3,830 ) (4,649 ) (665 ) Net increase/(decrease) in cash and cash equivalents 3,936 (373 ) (4,645 ) (664 ) Cash and cash equivalents at beginning of the year 9,555 13,567 13,164 1,882 Exchange differences on cash and cash equivalents 76 (30 ) (49 ) (7 ) Cash and cash equivalents at end of the year 13,567 13,164 8,470 1,211 The paragraphs below set forth a detailed cash flow analysis for the year ended December 31, 2025. For a detailed cash flow analysis for the years ended December 31, 2024, see “5.B. Liquidity and Capital Resources” of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission on April 23, 2025. Operating activities Net cash provided by operating activities was RMB10,231 million (US$1,463 million) in 2025. The difference between our profit before income tax of RMB13,277 million (US$1,899 million) and the net cash provided by operating activities was mainly due to: (i) net gains in relation to equity investments of RMB2,381 million (US$340 million); (ii) the income tax paid of RMB1,821 million (US$260 million); (iii) the decrease in accounts payables of RMB783 million (US$112 million); and (iv) the increase in accounts receivables and other operating assets of RMB771 million (US$110 million); partially offset by (i) depreciation and amortization of RMB1,375 million (US$197 million); (ii) non-cash share-based compensation expense of RMB669 million (US$96 million); and (iii) the increase in other operating liabilities of RMB538 million (US$77 million). Investing activities Net cash used in investing activities was RMB10,227 million (US$1,462 million) in 2025, which was primarily attributable to (i) placement of term deposits with initial terms of over three months of RMB17,880 million (US$2,557 million); (ii) placement of short-term investments of RMB3,800 million (US$543 million); (iii) payments for acquisition of investments accounted for using equity method of RMB1,841 million (US$263 million); (iv) payments for acquisition of investments accounted for as financial assets at fair value through other comprehensive income of RMB1,244 million (US$178 million); (v) net cash payment for business combination of RMB1,056 million (US$151 million); and (vi) purchase of intangible assets of RMB883 million (US$126 million); partially offset by (i) receipt of RMB12,590 million (US$1,800 million) from maturity of term deposits with initial terms of over three months; and (ii) receipt from short-term investments of RMB3,851 million (US$551 million). Financing activities Net cash used in financing activities in 2025 was RMB4,649 million (US$665 million), which was mainly due to (i) repayment of notes payable of RMB2,131 million (US$305 million); (ii) payment for dividends to our shareholders of RMB1,981 million (US$283 million); and (iii) payment for repurchase of ordinary shares of RMB390 million (US$56 million). Material Cash Requirements Our material cash requirements as of December 31, 2025 and any subsequent interim period primarily include our capital expenditures, commitments, share repurchase, long-term debt obligation under our 2030 Notes, and dividend payments. 2030 Notes represents future maximum commitment relating to the principal amount and interests in connection with the issuance of US$500 million in aggregate principal amount of senior notes bearing an annual interest rate of 2.000%, which will mature on September 3, 2030. 121 We expect to meet our current and future material cash needs through our existing cash, cash equivalents, term deposits and cash generated from operating activities. We expect to continue making cash expenditures to support our operations and the growth of our business. We may also use earnings remitted by our PRC subsidiaries to fulfil our onshore and offshore capital needs. Capital Expenditures Our capital expenditures are incurred primarily in connection with purchases of property, plant and equipment, land use rights and intangible assets. Our capital expenditures were RMB1,164 million and RMB1,032 million and RMB1,188 million (US$170 million) in 2023, 2024 and 2025, respectively. We intend to fund our future capital expenditures with our existing cash, cash equivalents, term deposits and cash generated from operating activities. We will continue to make capital expenditures to meet the expected growth of our business. Commitments The following table sets forth our commitments as of December 31, 2025. Payment due by period Total Less than 1 year 1 – 3 years 3 – 5 years More than 5 years RMB US$ RMB US$ RMB US$ RMB US$ RMB US$ (in millions) Operating commitments(1) 121 17 118 17 3 0 - - - - Content royalties(2) 2,591 371 2,288 327 302 43 1 0 - - Capital commitments(3) 605 87 392 56 203 29 10 1 - - Investment commitments(4) 50 7 50 7 - - - - - - Notes: (1)Represents our future minimum commitments under non-cancelable operating arrangements, which are mainly related to offline performance services and other services. (2)Represents the minimum royalty payments associated with license agreements that were effective as of the end of the respective period. Contracts that are still in the negotiation and have not yet been signed are not included in this commitment. (3)Represents the minimum payments associated with construction of buildings. (4)Represents commitments to acquire the equity interests in certain entities. Except for the commitments disclosed above, the Group has proposed to acquire Ximalaya Inc., which is one of the leading online audio platforms in China, pursuant to a Merger Agreement dated June 10, 2025. The consideration of the acquisition consisted of (i) cash of US$1.26 billion, (ii) the Class A ordinary shares of the Company representing up to 5.1986% of the Company's total outstanding ordinary shares as of a specified date prior to closing, and (iii) additional Class A ordinary shares of up to 0.37% of such total share count to be issued to the “founder shareholders” as defined in the Merger Agreement in tranches. The closing of the acquisition is subject to relevant regulatory approvals and certain other closing conditions. Share Repurchase Our share repurchase may be made from time to time through open market transactions at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on the market conditions. We repurchased ADSs from the open markets at an aggregate consideration of approximately US$175 million, US$261 million and US$64 million under our share repurchase programs in 2023, 2024 and 2025. On March 21, 2023, our board of directors authorized the 2023 Share Repurchase Program under which we may repurchase up to US$500 million of our Class A ordinary shares, including in the form of ADSs, during a two-year period commencing from March 2023. On March 17, 2025, our board of directors authorized the 2025 Share Repurchase Program under which we may repurchase up to US$1 billion of our Class A ordinary shares, including in the form of ADSs, during a two-year period commencing on March 21, 2025. We generally fund our share repurchase with our existing cash and may make additional share repurchase depending on the market conditions. Off-Balance Sheet Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We currently do not maintain any derivative contracts that are indexed to our shares and classified as shareholder’s equity and are not reflected in our consolidated financial statements and the notes thereto. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. We did not have any off-balance sheet arrangements as of December 31, 2025. 122 Holding Company Structure Tencent Music Entertainment Group is a holding company with no material operations of its own. The Group conducts its operations primarily through our PRC subsidiaries and the VIEs. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries which, in turn, depends on the payment of the service fees and royalty payments to our PRC subsidiaries by the VIEs in the PRC pursuant to certain contractual arrangements. See “Item 4. Information on the Company — 4.C. Organizational Structure — Contractual Arrangements with the VIEs and Their Respective Shareholders or Partners.” In 2023, 2024 and 2025, the amount of Service Charges paid to our PRC subsidiaries from the VIEs was RMB16,610 million, RMB18,820 million and RMB20,252 million (US$2,896 million), respectively. We expect that the amounts of such service fees and royalty payments will increase in the foreseeable future as our business continues to grow. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance, or PRC GAAP. In accordance with PRC company laws, our PRC subsidiaries and the VIEs in China must make appropriations from their after-tax profit to non-distributable reserve funds including (i) statutory surplus fund and (ii) discretionary surplus fund. The appropriation to the statutory surplus fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of our PRC subsidiaries and the VIEs. Appropriation to discretionary surplus fund is made at the discretion of our PRC subsidiaries and the VIEs. As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund-raising activities to our PRC subsidiaries only through loans or capital contributions, and to the VIEs only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements. See “Item 3. Key Information — 3.D. Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and regulatory control of currency conversion may delay or prevent us from using the proceeds of our financing activities to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” As a result, there is uncertainty with respect to our ability to provide prompt financial support to our PRC subsidiaries and the VIEs when needed. Notwithstanding the foregoing, our PRC subsidiaries may use their own retained earnings (rather than Renminbi converted from foreign currency denominated capital) to provide financial support to the VIEs either through entrustment loans from our PRC subsidiaries to the VIEs or direct loans to such VIEs’ nominee shareholders, which would be contributed to the consolidated variable entity as capital injections. Such direct loans to the nominee shareholders would be eliminated in our consolidated financial statements against the VIE’s share capital. In 2025, our wholly-owned PRC subsidiaries only generated a minimal portion of our total revenues because substantially all of our businesses are subject to foreign investment restrictions under PRC law and therefore can only be conducted through the VIEs. In contrast, most of our assets are held by our offshore incorporated entities and wholly-owned PRC subsidiaries, mostly in the forms of goodwill and cash that do not generate revenues. For more information about the financial contribution of the VIEs to the Group, see “Item 3. Key Information — Transfer of Funds and Other Assets” and “Item 3. Key Information — Condensed Consolidating Schedule.” 5.C. Research and Development We have focused on and will continue to invest in our technology system, which supports all key aspects of our online platform and is designed to optimize for scalability and flexibility. Our R&D expenses were RMB2,525 million, RMB2,280 million and RMB2,317 million (US$331 million) in 2023, 2024 and 2025, respectively. 5.D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. Preparing these financial statements in conformity with IFRS as issued by the IASB requires us to exercise estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our 123 financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements. For a detailed discussion of our significant accounting policies and related judgments, see Note 4 to the consolidated financial statements of Tencent Music Entertainment Group included elsewhere in this annual report. The critical accounting estimates that we believe to have the most significant impact on our consolidated financial statements are described below. Recoverability of non-financial assets We test annually whether goodwill has suffered any impairment. Goodwill and other non-financial assets, mainly including property, plant and equipment, right-of-use assets, intangible assets, as well as investments accounted for using equity method are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been determined based on value-in-use calculations or fair value less costs to sell. These calculations require the use of judgments and estimates. Our judgment is required in the area of asset impairment, particularly in assessing: (i) whether an event has occurred that may indicate that the related asset value may not be recoverable; (ii) whether the carrying value of an asset can be supported by the recoverable amount, being the higher of fair value less costs to sell and net present value of future cash flows which are estimated based upon the continued use of the asset in the business; (iii) the selection of the most appropriate valuation technique, e.g. the market approach, the income approach, as well as a combination of approaches, including the adjusted net asset method; and (iv) the appropriate key assumptions to be applied in the adopted valuation models, including discounted cash flows and market approach. Changing the assumptions selected by us in assessing impairment, including the revenue growth rates and pre-tax discount rates assumptions in the cash flow projections and selection of comparable companies adopted in the market approach, could materially affect the net present value used in the impairment test and as a result affect our financial condition and results of operations. If there is a significant adverse change in the key assumptions applied, it may be necessary to take an impairment charge to income statement. Income taxes We are subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact current income tax and deferred income tax in the period in which such determination is made. Share-based compensation expenses and valuation of our ordinary shares Share-based compensation relating to TME Incentive Plans We have adopted four share-based compensation plans: the 2014 Share Incentive Plan, the 2017 Option Plan, the 2017 Restricted Share Scheme, and the 2024 Share Incentive Plan (collectively, the “TME Incentive Plans”). The share-based equity awards granted under the TME Incentive Plans are measured at fair value and recognized as an expense, net of estimated forfeitures, over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied and credited to equity. Forfeitures are estimated at the time of grant and revised in the subsequent periods if actual forfeitures differ from those estimates. 2014 Share Incentive Plan Binomial model is used to measure the fair value of equity awards granted pursuant to the 2014 Share Incentive Plan. Upon the adoption of the 2024 Share Incentive plan, the outstanding options under the 2014 Share Incentive Plan were all transferred to the 2024 Share Incentive plan and the 2014 Share Incentive Plan ceased to be of any effect. 124 2017 Option Plan and 2017 Restricted Share Scheme Binomial model is used to measure the fair value of equity awards granted pursuant to the 2017 Option Plan and 2017 Restricted Share Scheme. Upon the adoption of the 2024 Share Incentive plan, the outstanding options and RSUs under the 2017 Option Plan and 2017 Restricted Share Scheme were all transferred to the 2024 Share Incentive plan, 2017 Option Plan and 2017 Restricted Share Scheme ceased to be of any effect. 2024 Share Incentive Plan We adopted the 2024 Share Incentive Plan in May 2024. According to the 2024 Share Incentive Plan, 228,775,377 ordinary shares were reserved to be issued to any qualified employees, directors, non-employee directors, and consultants as determined by the board of directors of the Company. The determination of the fair value is affected by the share price as well as assumptions regarding a number of complex and subjective variables, including the expected share price volatility, expected forfeiture rate, risk-free interest rates, contract life and expected dividends. Assumptions used in such determination of fair value are presented below. Granted in 2023 2024 2025 Risk free interest rate 3.46%-3.83% 4.23%-4.31% 4.48%-4.65% Expected dividend yield 0% 0-0.12% 0.13%-0.23% Expected volatility range 60% 60% 60% Exercise multiples 2.2-2.8 2.2-2.8 2.2-2.8 Contractual life 10 years 10 years 10 years Subsequent to our initial public offering in December 2018, the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares for purposes of recording share-based compensation in connection with the equity awards granted pursuant to the 2017 Option Plan, the 2017 Restricted Share Scheme and the 2024 Share Incentive Plan.