CloudMusic (stock code: 09899.HK) saw its shares tumble 16% today, closing at HK$95.1 with a market capitalization of HK$20 billion, following the release of its first-half earnings report.

The company reported revenue of 3.959 billion yuan for the first half of 2026, a 3.4% increase from 3.827 billion yuan in the same period last year.

Online entertainment services revenue reached 3.067 billion yuan, up 3.4% year-over-year from 2.967 billion yuan, with membership subscription services contributing 2.6 billion yuan compared to 2.47 billion yuan in the prior-year period. Social entertainment services revenue rose 3.7% to 890 million yuan from 860 million yuan.

Gross profit for the period grew 5.9% to 1.474 billion yuan, up from 1.392 billion yuan a year earlier. However, operating profit declined 11.6% to 746 million yuan from 845 million yuan, while net profit for the period fell sharply by 57% to 809 million yuan, down from 1.882 billion yuan in the first half of 2025.

Adjusted operating profit came in at 800 million yuan, down 12% from 905 million yuan in the prior-year period, and adjusted net profit dropped 55.8% to 860 million yuan from 1.946 billion yuan.

The primary driver behind the significant profit decline was a swing in income tax credits, which shifted from a positive 814 million yuan in the prior-year period to a negative 122 million yuan in the current reporting period.