Company Reports

Universal Music should be a primary beneficiary of ongoing music industry growth we expect. Fears about artificial intelligence-generated music have recently sparked concern that these recordings will take share from the human artists on which Universal relies, but we think these concerns are overstated. Unless consumers are willing to forgo human-created music, the power Universal has over “real” music gives it leverage to continue taking its historical share of revenue on subscription streaming platforms. However, we’ve become less optimistic about the likelihood that streaming revenue continues growing it the rate it did during the first half of the 2020s.

Universal reported poor sales, profits, and free cash flow. Excluding currency fluctuations and the acquisition of Downtown Music, total second-quarter sales rose 6% year over year, while first-half adjusted EBITDA was flat. Free cash flow dropped to EUR 24 million from EUR 163 million.

Universal Music's first-quarter revenue was virtually flat year over year, including an 8-percentage-point currency headwind, but also a 3-point boost from its acquisition of Downtown Music, which also weighed on margins. Organic subscription streaming revenue grew only 8% year over year.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Fears about artificial intelligence-generated music have recently sparked concern that these recordings will take share from the human artists on which Universal relies, but we think these concerns are overstated. Unless consumers are willing to forgo human-created music, the power Universal has over “real” music gives it leverage to continue taking its historical share of revenue on subscription streaming platforms, which account for the bulk of its sales.

Pershing Square has offered to merge Universal Music with Pershing's special purpose acquisition vehicle, SPARC Holdings. Universal shareholders would receive 0.77 shares in SPARC plus EUR 5.05 in cash per share of Universal. Pershing shared plans to unlock value it sees in Universal.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Fears about artificial intelligence-generated music have recently sparked concern that these recordings will take share from the human artists on which Universal relies, but we think these concerns are overstated. Unless consumers are willing to forgo human-created music, the power Universal has over “real” music gives it leverage to continue taking its historical share of revenue on subscription streaming platforms, which account for the bulk of its sales.

Excluding the effect of currencies, which have weighed heavily on results over the past year, Universal Music's sales growth accelerated in 2025, including during the fourth quarter. Investment needs have been high but are paying off, and we expect further sales acceleration in 2026.

Universal Music's third quarter was very strong, and the most critical component—subscription streaming sales—is poised to accelerate next year. However, the weak US dollar contributed to a 5-percentage-point currency headwind, without which total sales growth exceeded 10% year over year.

Tough licensing, merchandise, and vinyl comparisons from last year—when Taylor Swift released an album and was touring—plus a 3-percentage-point currency headwind were behind second-quarter sales growth of only 1.6%. However, subscription streaming sales grew 8.5% in constant currency.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Universal is the largest of the major record companies and currently has an impressive roster of both older and more modern artists. We believe the record companies will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years. With Universal’s scale, resources, and current roster, we think it is better positioned than any peer.

Universal Music's first-quarter revenue grew 9.5% year over year even after excluding a 2.3% growth benefit from currency exchange rates, with the critical subscription streaming revenue driving the strength. The EBITDA margin also expanded, as lower employee costs boosted profits.

Universal Music shares fell nearly 9% on March 14 after Bill Ackman announced that his Pershing Square had decided to trim its position after the stock reached 27% of the fund's holdings. As of Universal's last annual report in 2023, Pershing owned 10% of Universal.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Universal is the largest of the major record companies and currently has an impressive roster of both older and more modern artists. We believe the record companies will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years. With Universal’s scale, resources, and current roster, we think it is better positioned than any peer.

Better profitability was the highlight of Universal Music's fourth-quarter report, while sales growth was consistent with what we expect long term. Adjusted for comparability, fourth-quarter sales grew 6% year over year, and EBITDA grew 10%. Full-year sales and EBITDA grew 8% and 14%, respectively.

After last quarter’s soft results spooked the market, third-quarter recorded music subscription revenue bounced back to what we expect is a long-term trendline. Overall revenue growth decelerated slightly from a very strong second quarter, and we expect most revenue streams to remain choppy from quarter to quarter. Universal does not report full financials or free cash flow with its third-quarter results, but EBITDA growth continues to outpace revenue growth. We are maintaining our EUR 31 fair value estimate and believe Universal’s disproportionate share of global music rights—the key factor behind our wide-moat rating—will underpin an extended time frame of solid growth.

Universal Music’s stock was slammed after its second-quarter earnings report, with the firm reporting a deceleration in subscription streaming revenue growth to the midsingle digits. With recorded music subscription sales making up about 40% of total revenue, less robust long-term subscription prospects would warrant a sizable valuation cut. However, after digging deeper into the outlook for subscription streaming and listening to last week’s capital markets day, we have increased conviction in our initial take: subscription growth is likely to reaccelerate, and the market’s response was a drastic overreaction. We believe Universal has a wide moat and more power than any other company in a music industry poised to continue growing. In our view, the market selloff allowed us to buy a best-of-breed stock at a significant discount to fair value, which we continue to estimate at EUR 31.

Universal Music posted strong second-quarter sales and adjusted EBITDA, but growth from subscription streaming service recordings, the firm's biggest source of revenue, decelerated, and free cash flow was weak. We believe free cash flow will improve significantly in the second half, which is seasonally stronger, and quarterly vacillations in growth rates don't change our view that there is significant long-term growth ahead for streaming revenue. We are maintaining our EUR 31 fair value estimate, leaving shares modestly undervalued in our view.

We’ve reevaluated the major record companies and think these firms will remain critical to artists and are positioned to continue taking their fair share of a growing music industry. For the two pure-play majors, we have upgraded Universal’s moat rating to wide from narrow, and we are maintaining our narrow moat rating for Warner. We’re maintaining our EUR 31 fair value estimate for Universal and raising Warner’s fair value estimate to $37 from $36.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Universal is the largest of the major record companies and currently has an impressive roster of both older and more modern artists. We believe the record companies will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years. With Universal’s scale, resources, and current roster, we think it is better positioned than any peer.

Universal Music posted a solid first quarter, with strength across multiple lines of revenue, though currency headwinds damped top-line growth. The firm also announced it has reached an agreement with TikTok that puts Universal’s music back onto TikTok immediately after being off that platform for about three months. With the firm tracking our full-year forecast, excluding currencies, we are maintaining our EUR 31 fair value estimate.