Universal Music Group reported strong subscription revenue growth during the second quarter of 2026 as higher wholesale pricing under its Streaming 2.0 agreements contributed to continued expansion. However, a less favorable revenue mix, the Downtown Music Holdings acquisition, and losses in Merchandising weighed on profitability.
Recorded Music subscription revenue increased 16.6% in constant currency. The consolidation of Downtown contributed to the increase, while subscription revenue grew 6.7% when Downtown was excluded.
Wholesale price increases associated with Streaming 2.0 agreements contributed approximately 3.5 percentage points to subscription revenue growth. This benefit was partially offset by a 1.5-percentage-point negative impact from market-share pressures that began during the first quarter and continued into the second quarter.
UMG said a stronger release schedule helped its market share improve over the course of the quarter. The company’s top-selling artists included Noah Kahan, BTS, Olivia Rodrigo, Drake, and Olivia Dean.
Total second-quarter revenue increased 10.5% to €3.29 billion, or 13.3% in constant currency. Excluding Downtown, revenue increased 6.4% in constant currency. Growth was supported by Streaming 2.0 pricing, strong physical sales, higher licensing revenue, and healthy Music Publishing performance revenue.
Recorded Music revenue increased 16.2% in constant currency and 8.7% when Downtown was excluded. Physical revenue rose 15.9%, while licensing and other revenue increased 34.9% due to strong audiovisual, live, and related income.
Underlying streaming performance was more restrained. Recorded Music streaming revenue increased 11.5% in constant currency, but grew only 1.7% excluding Downtown. UMG attributed this partly to consumers shifting their viewing from better-monetized video services toward short-form platforms.
The company’s revenue growth did not translate into a comparable increase in profitability. Adjusted EBITDA declined 0.3% on a reported basis to €674 million and increased only 1.5% in constant currency. Excluding Downtown, adjusted EBITDA was largely unchanged in constant currency.
Adjusted EBITDA margin contracted by 2.2 percentage points to 20.5%. UMG attributed the decline to the consolidation of Downtown, revenue and repertoire mix within Recorded Music, and a loss in its Merchandising business.
Recorded Music’s margin was affected by rapid growth at Virgin Music Group, which increased the proportion of lower-margin artist and label services revenue. A greater contribution from physical products, audiovisual content, and live-related income also pressured margins.
Music Publishing revenue increased 9.8% in constant currency, including 13.6% growth in digital revenue and a 12.8% increase in performance revenue. Excluding Downtown, Music Publishing revenue grew 2.7%.
Merchandising and Other revenue declined 10.7% in constant currency because of the timing of artist tours and direct-to-consumer product releases. The segment generated an adjusted EBITDA loss of €5 million due to lower revenue against fixed overhead and increased artist and repertoire expenses.
For the first half of 2026, UMG generated revenue of €6.19 billion, representing constant-currency growth of 10.8%. Adjusted EBITDA increased 2.7% in constant currency to €1.31 billion, while the adjusted EBITDA margin declined 1.6 percentage points to 21.1%.
First-half free cash flow declined to €24 million from €163 million. The decrease reflected increased working-capital usage, higher interest expenses, greater capital expenditures, and lower operating profit.
UMG declared an interim dividend of €0.24 per share, unchanged from the prior-year interim dividend. The company plans to pay approximately €432 million to shareholders in October 2026.
The results show that Streaming 2.0 pricing is beginning to provide a measurable revenue benefit. However, UMG’s margin contraction indicates that acquisition-related effects and growth in lower-margin revenue categories are limiting how much of that expansion reaches adjusted earnings.
KEY QUOTES:
“We’re delivering on our strategic plan, and working to further sharpen our execution, while capitalizing on the opportunities presented by new technologies and the ever-evolving music ecosystem. Our unique combination of global reach, local expertise, artist development, vast audio and visual IP and entrepreneurial culture positions UMG to deliver long-term growth, sustained value creation, and creative and commercial success for our artists and songwriters.”
Lucian Grainge, Chairman and Chief Executive Officer of UMG
“This quarter demonstrated both the strong fundamentals of our business and the opportunities we see to improve. Our focus is on building our market leadership, while driving top and bottom-line growth, improving efficiency, and continuing to invest where we see the greatest returns.”
Matt Ellis, UMG’s CFO
