Universal Music Group: Weak 2Q on subscription growth and margins

Research evidence excerpt

Universal Music Group: Weak 2Q on subscription growth and margins

ch Cons.

pointing to timing, market-share variability and phasing, with Pandora and Apple 12/26E 1.06 1.02 -4 1.02

pricing helping 2H; (3) India could be a new premium-conversion lever, with UMG 12/27E 1.14 1.09 -4 1.15

introducing a 72-hour paid subscribers only release window for domestic and 12/28E 1.21 1.16 -4 1.27

international artists from late August; (3) Music Publishing guidance was lowered, with

management now expecting MSD% rather than HSD% growth near term. Jo Barnet-Lamb

Analyst

joseph.barnet-lamb@ubs.com

We cut 2026E EPS by 4% to reflect our caution on sub growth and margins

+44-20-7567 4599

We cut 2026E group revenues (ex-Downtown) by 2% and cut organic growth by

Ashna Gautam300bps, the majority of which is driven by a ~280bps downgrade in subscription

Associate Analyst

revenues. We now expect aEBITDA margins to decline by 10bps yoy in 2026E to ashna.gautam@ubs.com

22.4% (prev: 22.7%), albeit we expect 2H margin expansion to be better than the first +44-20-7567 6364

half. Our changes flow through to a 2026E and 2027E aEPS cut of 4%.

Sarah Roberts

Our view sarah.roberts@ubs.com

We expect a negative share price reaction. We acknowledge some positives including +44-20-7901 6787

detail around potential future monetisation opportunities from AI and from India.

However, we expect investors to focus on softer subscription growth, significant EBITDA

downgrades and weaker FCF generation. As such, these results are more likely to

reinforce the bear case that UMG's growth is becoming increasingly dilutive to returns.

Following our FCFE downgrades of 9% in 2026E, UMG now trades on 2.9/4.2% (incl

catalogue investments) which we think now looks demanding. Looking ahead, we still