Tencent Music Entertainment Group, owned by Chinese tech giant Tencent Holdings, on Monday beat quarterly results estimates, driven by strong growth in subscription and advertising revenue from its music streaming platform.

The company has been expanding its music library through new partnerships and multi-year licensing deals. That, coupled with efforts to diversify its content base through long-form shows and live talk programs have helped lure more paying users as well as advertisers.

Tencent Music and Sony Music Entertainment said on Monday they had signed a multi-year extension of their digital distribution agreement.

First-quarter revenue from music subscriptions grew over 40 percent to 1.69 billion yuan ($260 million), primarily due to an increase in the number of paying users, Tencent Music said.

Tencent Music added 4.9 million online paying users, the largest quarterly net increase since 2016, it said. The U.S.-listed company now boasts 60.9 million paying members, up 42.6 percent from a year earlier. 

However, monthly active users (MAUs) for both music and social entertainment platforms declined by 6.4 percent and 14.2 percent year on year, respectively, sending the company's U.S.-listed shares down 1.4 percent in extended trading.

"Users have stopped growing in general; last year was a high base due to the COVID," said Tian Hou, analyst at T.H. Capital Research.

Profit attributable to equity holders of Tencent Music rose to 926 million yuan in the quarter from 887 million yuan a year earlier.

Excluding items, the company earned 69 yuan per American Depository Share (ADS), above estimates of 55 yuan per ADS.

Revenue rose 24 percent to 7.82 billion yuan, surpassing analysts expectations of 7.73 billion yuan, according to IBES data from Refinitiv.

Tencent Music operates popular apps QQ Music, Kugou Music and Kuwo Music in China and has over 30 million tracks licensed from domestic and international music labels.

The music group's previous deals with Universal Music, Sony Music and Warner Music enabled it to license their tunes for its own platforms, but also to exclusively sub-license these catalogs to local rivals including NetEase Cloud Music and Alibaba's Xiami Music, which was shut down in February. 

Tencent Music dominates the online music-streaming market in China, with 615 million MAUs in the first quarter of 2021, down from 622 million in the quarter before. The number is about four times that of its closest competitor NetEase Cloud (150 million) in the last quarter of 2020, the latest available data.

(With input from Reuters)