Tencent Music’s $2.4 Billion Ximalaya Play: A Bold Move for Audio Dominance?

Tencent Music Entertainment Group (TME) is reportedly on the brink of acquiring China’s leading podcast platform, Ximalaya, in a deal valued at $2.4 billion, a move that could redefine the landscape of audio streaming in the world’s second-largest economy. The proposed acquisition—structured as a mix of cash and stock—aims to bolster TME’s push beyond traditional music streaming and into the booming podcast and audiobook markets. While terms remain under negotiation, the strategic implications for investors are clear: this could be a pivotal step toward positioning TME as China’s answer to Spotify.

Ask Aime: What impact will Tencent Music's acquisition of Ximalaya have on China's audio streaming market?

The Strategic Rationale: Diversifying Beyond Music

TME’s core business—music streaming—has faced slowing growth in recent years as the market matures. The acquisition of Ximalaya, which boasts 303 million monthly active users as of 2023, would inject a trove of non-music content, including podcasts, audiobooks, and educational audio. This aligns with TME’s “dual-engine strategy,” which emphasizes content innovation and platform expansion.

The move also mirrors global trends: Spotify’s entry into audiobooks in 2023 added 15 hours of monthly listening to its Premium tiers, redefining the company’s value proposition. By acquiring Ximalaya, TME aims to replicate this model in China, where podcast listenership is growing at a blistering pace.

TME’s shares have climbed 18% year-to-date in 2025, reflecting investor optimism about the deal. The company’s Q4 2024 results underscore its financial momentum: subscription revenue surged 25.9% YoY to RMB 15.23 billion ($2.12 billion), while paying music subscribers hit 121 million—up 13.4% annually.

Competitive Landscape: Outpacing NetEase and Global Giants

The acquisition would directly challenge rivals like NetEase Cloud Music, which has 98 million paying subscribers as of late 2024. TME’s existing platforms—QQ Music, Kugou, and Kuwo—already dominate China’s music market, but Ximalaya’s content library could solidify its lead in the broader audio space.

Analysts estimate that TME’s revenue could grow 8.9% annually if the deal closes, driven by cross-platform synergies. For instance, integrating Ximalaya’s podcasts with TME’s AI tools, such as its AI Songwriter, could create a uniquely personalized audio experience.

Regulatory Risks and Shareholder Gains

The deal faces hurdles in China’s tightly regulated tech sector. However, TME’s parent company, Tencent Holdings, already holds stakes in both TME and Ximalaya, potentially smoothing regulatory approval. Additionally, Sony Music Entertainment—a Ximalaya investor since 2020—could see gains: its $50 million stake in Ximalaya’s Series E-2 round now represents a significant return if the acquisition proceeds.

Valuation and Investor Outlook

At a $2.4 billion valuation, the deal represents a premium for Ximalaya, which abandoned a 2021 U.S. IPO amid regulatory headwinds. For TME, the price tag is manageable given its $5.2 billion market cap as of early 2025. Analysts have set a price target of $16.35 per share for TME—23.6% above its current price—assuming the deal closes successfully.

Conclusion: A Risky Gamble with High Upside

The Tencent Music-Ximalaya merger is a high-stakes bet on the future of audio streaming. If executed, it would position TME to capitalize on China’s $12 billion podcast market, which could grow to $20 billion by 2027, according to industry estimates. The deal also aligns with TME’s AI-driven innovation, such as its AI Songwriter, which has already boosted user engagement on QQ Music.

However, risks remain. Regulatory approval is far from certain, and integrating Ximalaya’s content into TME’s ecosystem without diluting its music-centric brand will require finesse. Still, with 121 million paying subscribers and a 25.9% revenue growth tailwind, TME is well-positioned to dominate both music and audio markets. For investors, this deal is more than a merger—it’s a vote of confidence in TME’s vision to become the Spotify of China.

While Spotify’s revenue grew 14% YoY in 2023, TME’s 25.9% subscription growth highlights its superior momentum in a faster-growing market. If the Ximalaya deal succeeds, TME’s stock could continue its ascent toward the $16.35 price target, rewarding investors who bet on its audacious expansion.