Universal Music Group: Growth hits a lower note: what the new AI world entails

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Universal Music Group: Growth hits a lower note: what the new AI world entails

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Universal Music Group

Growth hits a lower note: what the new AI

world entails

Rating Change: UNDERPERFORM | PO: 17.00 EUR | Price: 18.91 EUR

Underperform, PO €17 = 10% potential downside 14 July 2026

Universal Music Group (UMG) is entering a phase characterised by (1) Slowing growth of Equity

traditional paid streaming (2) Proliferation of content and enhanced value of distribution

vs. IP ownership (3) An AI-enabled transformation of ‘superfan’ listeners into creators.

Key ChangesWe are Underperform-rated with a €17 PO as we think these dynamics will translate into

lower earnings growth than the market expects (we stand 4-8% below consensus EPS in (EUR) Previous Current

2027-28E) with subdued FCF conversion. Yet, UMG shares trade at a relatively Inv. Opinion -6- B-3-7

unattractive 11.5x 2027E EV/EBITDA and 5% FCF yield, above music and media peers. Inv. Rating NO RATING UNDERPERFORM

Price Obj. NA 17.00

The streaming heyday is over for major labels

Leveraging data, surveys and analysis from key sources such as MIDiA and Luminate, we Adrien de Saint Hilaire >>

Research Analyst

think UMG will struggle to meet its 8-10% subscription revenue CAGR guidance. Global MLI (UK)

subscriber growth is healthy but increasingly polarized geographically with UMG +44 20 7995 7994 adrien.de_saint_hilaire@bofa.com

underexposed to the fastest-growing markets. UMG’s pivot to a price-led growth model David Amira, CFA >>

makes sense but the rising dominance of Spotify and YouTube on the DSP side, Research Analyst

abundance of available content, rise of passive listening and growth of “mid tail” labels MLI+44 (UK)20 7995 7559

may undermine efforts.