Tag: Business

Stopping disclosure is a sure pressure in near term

Tencent Music $TME will no longer report the operating metrics on a quarterly basis such as Monthly Active Users (MAU) for online music services and Number of Paying Users for online music, starting from next quarter.

The stock dropped 24.65% in a day, with other concerns like more competition from ByteDance’s Soda Music.

It’s almost a sure thing that stopping disclosure on key operating metrics will make stock price under pressure.

A very similar case is Netflix in 2024.

In April 2024, Netflix announced it would stop reporting quarterly membership numbers and Average Revenue per Member (ARM) starting in 2025.

Netflix shares fell ~8% the day after the Q1 2024 report.

Here is the last report on these operating metrics.

 

The company argued that subscriber count is no longer the best indicator of health due to new revenue streams like advertising and “extra member” fees.

Netflix still discusses those in shareholder letters and gives financial guidance, like this for 4q25 earnings.

While $TME gave similar explanations, it didn’t give investors 4 quarters to adapt.

As advertising and other IP related offerings scale, and as we offer multi-tiered membership for online music subscriptions, the business impact of each paid membership varies. As a result, we are increasingly focused on revenue and profit as our primary performance indicators.

Given this evolution, starting from next quarter, we will discontinue the disclosure of certain quarterly operating metrics, including online music MAU, paying users and ARPPU.

We will instead report the number of total paying users across our music services annually, as of year-end.

– 4q25 TME earnings release

 

Three 40bn RMB investments

Bytedance’s Volcano Cloud: to lose 40bn RMB in 2026

Alibaba is subsidizing over 40bn RMB per year via Taobao Instant Commerce. (Over 50bn announced in July 2025 for next 12month; reiterated importance of subsidy in 2026 earlier this year)

Tencent announced more than 36bn investments in AI product development for 2026 with its 4q25 earnings, with no return KPI near term and more to come in the future.

These are 0.1% of China GDP already!

Better compensation, subsidy to consumers and businesses are also different kinds of GDP-boosting initiatives; big companies are doing their social responsibility jobs as well.

Apple vs China Internet: 礼尚往来

Apple cuts App Store fees in China by 5% – from 30% to 25%. Apple also said it commits to offer fee level that is “not higher than overall rates in other markets”.

This benefits the big Internet companies in China.

In return, these Chinese Internet companies are making efforts to promote and sign more people up for OpenClaw-like services, which can drive Apple sales via Mac Mini etc.

“Exchange of courtesies”.

OpenClaw is such a gift to Tencent

1/ Tencent’s own foundation model Hunyuan is not impressive. However, OpenClaw-like applications doesn’t rely on any single model. Tencent can be more neutral than other Chinese internet giants which shall prioritize their models. So weakness in Hunyuan now becomes a strength.

2/ Chatbot-like applications like Yuanbao is cannibalizing WeChat, whether it’s eating more users’ time or it’s hurting WeChat’s user experience during CNY red pocket campaign. If Yuanbao becomes the best in competition, WeChat shall indirectly be weakened; if Yuanbao loses to Doubao etc., Tencent also loses. However, OpenClaw-like applications leverages and enriches WeChat ecosystem. Winning the OpenClaw-like competition is a more coherent strategy for Tencent.

3/ Tencent is one of the most trusted among tech giants in China. It’s security capability is one of the best in China, which is needed here.

Nio finally looks to make some money, so what?

How much losses has Nio made over the past few years?

Over 80 billion rmb, from 2020 to 2025.

In the worst years, Nio lost over 20 billion rmb per year.

Meanwhile, investors are finally seeing the light at the end of the tunnel – Nio made 0.5bn rmb in operating profit in 4q25, thanks to rising sales of large premium SUVs, which carries higher gross profit margin.

You need to take it with a grain of salt though.

1/ Fourth quarter is usually a good quarter

Indeed, Nio only guided non-gaap breakeven for full-year 2026.

Well, at least it’s not accumulating more losses.

2/ Peers like Li Auto, which was profitable before, made losses again in 3q25 

It’s the nature of auto industry to be cyclical, due to product cycles etc.

3/ Leaders like Tesla is already making money other than selling cars

If selling EVs is such a good business, Tesla should do more, rather than “diversifying” into FSD, energy storage etc.

China’s coffee consumption growth slows

Luckin Coffee, the largest coffee chain in China, posted 1.2% company-owned same-store sales growth for 4q25, which is weak.

During earnings call, Luckin says China’s coffee market is still in a rapid growing phase – is that so?

I think there is still room, but current “coffee intensity” is already like in a mature stage.

Starbucks reward members (35mn) consume 3-5 cups per month.

Luckin members consumes close to 342mn cups per month in 2025 (4.1bn cups annually) and close to 100mn monthly transacting consumers, which translate to over 3 cups per customer per month approximately.

Why there is still room (but may be hard to penetrate)?

1) Luckin’s 450mn customer base means there could be 1.5x to 2x room in China, excluding children and elderly.

2) If Starbucks can get 16k stores in US, Luckin may get up to 4x of that which is over 60k stores in China, or 2x from current 30k stores.

3) Starbucks Reward member is an underestimation of active consumers of Starbucks, which could be like 70-90mn. 4x of that gives you 210-360mn potential which is 2-3x from current 100mn for Luckin.

Why hard to penetrate?

1) lower-hanging fruit / easy regions already have footprint.

2) China has more “layers” of consumers; thus hard to have one-size-fit-all offering. There are more competitions in China. Can’t handle price sensitive and premium customers together.

AI to disrupt games?

AI has created chaos in many areas, including the gaming industry.

Google Genie was a case in point a few weeks ago.

TakeTwo (-10%), Roblox (-10%), and Unity (-20%) all down after Google debuts AI Game Creation Tool
byu/Rukuba inValueInvesting

However, I don’t think code alone is what makes a game successful.

Many successful games are like basketball or soccer.

It’s a cultural and social thing.

Shooting is fun but that’s not basketball is all about.

I bet AI can create and update new games easily but it’s the same for sports.

There can be new “sports” coming up – they can be fun to play as well. However, the number of players, the audience, the whole league/industry around a classic sport are the moat.

In the pre-AI era, I don’t think the studio that has top-tier coders is guaranteed to have blockbuster games.

$RBLX $TTWO $TCEHY

Big capex is not longer welcomed

US big tech continue to post higher capex outlook for 2026 and those figures are surprisingly large.

However, you now start to negative reactions.

1/ Their own stocks respond negatively

2/ Nvidia stock, which presumably is a beneficiary for higher capex, hasn’t responded very positively

#Why capex is less welcomed?

1/ It could just be higher inflation across the chain. higher price for infrastructure, power equipment and construction workers etc. Therefore, it’s a less-efficient use of money

2/ Investors don’t see immediate growth. The 2026 growth outlooks, which should be supercharged by already massive capex in 2025, is not impressive enough. Investors fear that marginal incremental growth coming from additional capex looks small, at least in the current year.

Xiaomi smartphone GP may drop 30% given rising memory cost

Some simple calculation:

Xiaomi smartphone GPM was 12.6% in 2024, with 192bn revenue.

Xiaomi sold 1.64 billion smartphones that year.

The GP per handset is about 147 RMB in 2024

Across different smartphone models, memory cost is different, ranging from 50-500 per handset.

But in a nutshell, it’s about 12-18% of BOM.

It’s could be about 150 memory cost per handset for Xiaomi, which is similar to GP per handset.

Then if memory cost is rising 50-100%, the entire GP per handset could be at risk.

To offset, Xiaomi may increase prices for customers.

And as a large customer for memory chips, it may not receive full mark-up immediately.

In the end, maybe 1/3 of the memory cost impact of 120 need to be absorbed by Xiaomi.

Then GP per handset could be more like 100-110 RMB.

And as the price increases, volume could be impacted, plus the RMB appreciation recently (two-thirds of Xiaomi smartphone volume is overseas).

Total impact to Xiaomi smartphone GP could be like 65-75bn, or 25-30% negative impact from 2024 level.