Universal Music Group N.V.

Second-quarter revenue increased 13.3% year over year to €3.3 billion; excluding Downtown, revenue grew 6.4%. Adjusted EBITDA rose 1.5% to €674 million, with €10 million from Downtown; excluding Downtown, EBITDA was flat and would have grown 2.2% absent the prior-year ISP settlement. Adjusted diluted EPS for the first half grew 4.3% to €0.47, and adjusted net profit rose 3.9%. For the half year, total revenue grew 10.8% (5.7% ex-Downtown) and adjusted EBITDA grew 2.7% (1.6% ex-Downtown). In recorded music, Q2 revenue grew 16.2% and adjusted EBITDA grew 2.8%; music publishing revenue grew 9.8%; merchandising and other revenue fell 11%. The company bought back €485 million of shares under its first €500 million buyback program and later completed that program in July; it also authorized a second €500 million buyback and completed €250 million from that authorization via participation in the Pershing Square sale. Free cash flow in the first half was €24 million versus €163 million last year, and operating cash flow before income tax was €408 million versus €488 million. Management said it still expects second-half free cash flow to be stronger than the first half. For 2026, UMG kept its adjusted EBITDA conversion range at 60% to 70% under a revised free cash flow definition.

Sir Lucian Grainge framed the quarter as evidence of UMG’s long-term strategy: strong artist roster, better monetization of streaming, and expanding opportunities in emerging markets, superfans, and AI. He stressed that the company is investing for decades, not quarters, and pointed to Streaming 2.0, India windowing, and AI partnerships as examples of shaping a more valuable ecosystem. His tone was confident and expansive, but he also acknowledged that some areas need improvement and that UMG is focused on stronger EPS and free cash flow.

Matthew Ellis emphasized that Q2 revenue growth came from recorded music, physical, Streaming 2.0 pricing, audiovisual, and live-related revenue, but margins were pressured by mix, prior-year settlement comparisons, and higher legal/professional fees. He said excluding Downtown, Q2 adjusted EBITDA margin was 21.5%, down 1.3 points, and recorded music margin was 24.9%, down 1.8 points. On cash flow, he noted first-half operating cash before tax of €408 million, CapEx of €44 million, and free cash flow of €24 million, while also explaining that the company revised its free cash flow definition to better reflect cash available for strategic investment and capital return. He also said advances continue to target strong risk-adjusted returns, catalog deals target at least 10% IRR, and the company has exceeded hurdle rates since listing.

Analysts focused on the mix of streaming growth, asking how volume, pricing, and market share should evolve and how the India paywall/windowing strategy would work. Management said subscriber growth remains healthy, pricing should benefit further in the second half from Pandora and Apple price increases, and market share improved as Q2 progressed thanks to stronger releases. On India, Lucian and Michael Nash said the 72-hour premium window starts at the end of August, is designed to build a healthier ecosystem, and follows lessons from China. Questions also centered on AI and Spotify’s new generative-AI product; management said artist opt-in is important, they are already having conversations with thousands of artists and estates, and they believe they can reach critical mass of support. Later, management said elevated legal/professional fees could come down, but they will monitor spending based on business opportunities.