In 2025, Tencent Music Entertainment Group (NYSE: TME) outperformed Spotify Technology (NYSE: SPOT) with a 122% total return, compared to Spotify’s 54% increase. TME, China’s largest music streaming service, has shown significant revenue growth, profitability improvements, and market capitalization gains.

TME’s dominance in the Chinese music streaming market is evident with over 550 million monthly active users and nearly 125 million paying users. Spotify, not available in China, invested around $1.6 billion in TME, showcasing its recognition of TME’s success and market position.

TME’s Q2 earnings report reflected strong growth, with revenue increasing by 18%, gross margin up by 240 basis points, and operating margin rising to 35.3%. Paying users increased by 6.3%, and average revenue per paying user rose by 9.3%. Shares surged by 12% post-report, highlighting a robust quarter.

Analysts’ price targets for TME suggest upside potential, with an average target of approximately $28.25 implying a 13.5% increase. TME’s forward P/E ratio of around 27x is significantly lower than Spotify’s 59x, indicating a potential undervaluation compared to its competitor.

TME, despite operating solely in China, has room for growth in the massive market with only 9% penetration of the country’s population. With Spotify’s investment, financial improvements, and bullish Wall Street price targets, investors are advised to consider TME for its strong market position and growth potential.

Read more at Nasdaq: Tencent Music Stock Outshines Spotify as China’s Music Giant