Universal Music Group N.V.

Second-quarter revenue grew 13.3% year-over-year to €3.3 billion. Adjusted EBITDA grew 1.5% to €674 million. Excluding Downtown, total revenue grew 6.4%, recorded music revenue grew 8.7%, music publishing grew 2.7%, and merchandising declined 10.7%. Excluding Downtown, adjusted EBITDA was flat year-over-year and margin declined 1.3 percentage points to 21.5%; for the first half, adjusted diluted EPS grew 4.3% to €0.47 a share, total revenue grew 10.8% (or 5.7% excluding Downtown), and adjusted EBITDA grew 2.7% (or 1.6% excluding Downtown). For cash flow, first-half 2026 operating cash flow before income tax was €408 million, CapEx was €44 million, and free cash flow was €24 million under the new definition; UMG also said it completed €485 million of its first €500 million buyback, authorized a second €500 million buyback, and had sold just under a third of its planned 50% Spotify stake sale for gross proceeds of €403 million. Guidance-wise, management did not give formal numerical guidance, but said they expect stronger free cash flow in the second half, subscription industry growth to remain healthy, some additional pricing benefit in Q3 and later in the year, music publishing to be a mid-single-digit growth business for the immediate future, merchandising to improve over time with 2027 better than 2026, and advances this year to be a reasonable similar amount to last year.

Lucian Grainge framed the quarter around UMG’s long-term strategic position: strong artist rosters, a more valuable streaming ecosystem, and growth opportunities in services, high-potential markets, superfans, and AI. He emphasized that UMG is using Streaming 2.0 to protect against royalty dilution and AI-related fraud, and said the company now has almost all major streaming partners under these agreements, including a completed Pandora deal. His tone was confident and assertive, especially on India and China, where he argued that windowing and paywalling premium content can improve the market and artist compensation.

Matthew Ellis highlighted the quarter’s financial tradeoffs: revenue growth was solid, but EBITDA margin was pressured by revenue and repertoire mix, last year’s settlement comparison, and higher overhead including legal fees. He cited recorded music revenue growth of 16.2% in Q2, 8.7% excluding Downtown, and subscription revenue growth of 16.6%, or 6.7% excluding Downtown; he also pointed out that the first half included €408 million of operating cash flow before tax, €44 million of CapEx, and €24 million of free cash flow under the revised definition. On capital allocation, he said UMG bought back €485 million under the first €500 million authorization, has a second €500 million buyback in place, and had sold €403 million of Spotify shares so far.

Analysts focused on streaming growth drivers, the new exclusive windowing strategy in India, and how the Spotify AI product could scale. Management said Q2 had a 1 percentage point headwind from one-time items, but they expect stronger pricing contribution from Pandora and Apple in the second half, better market share momentum after a stronger release slate, and no meaningful change in industry subscriber trend lines. On AI, Michael Nash said a critical mass of artist opt-ins will matter for launch, but UMG has already signed a significant percentage of discussions and sees consumer interest as real; Lucian added that the company is working weekly to bring more artists into the product while respecting opt-in choices. Questions also probed legal and professional fees, with management saying they could come down from Q2 levels, and Downtown’s margin, which Ellis said was about 5% and could improve as integration progresses.