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Warner Music Group (WMG) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· Communication Services· May 7, 2026

Source: earnings call transcript

Executive summary

Warner Music Group Q2 FY26 — Strong Revenue Growth and Margin Expansion Driven by Strategic Pillars

Warner Music Group delivered strong Q2 FY26 results, driven by broad-based revenue growth, significant margin expansion, and robust cash generation. This performance is attributed to the successful execution of its three strategic pillars: growing market share, increasing the value of music through PSM and AI partnerships, and enhancing efficiency. The company expresses confidence in its sustainable growth model and future prospects, particularly with AI initiatives expected to contribute materially from FY27.

Highlights

5

  • Total revenue increased 12% in constant currency, reflecting double-digit growth across Recorded Music and Music Publishing.

  • Adjusted OIBDA grew 24% with 230 basis points of margin expansion, exceeding the full-year target for the second consecutive quarter.

  • Recorded Music subscription streaming revenue accelerated to 15% growth on an adjusted basis, bolstered by PSM increases.

  • Adjusted net income increased 41% and adjusted EPS of $0.44 grew 38%.

  • The company achieved significant market share gains, with U.S. streaming share up 1.1 percentage points and U.S. new release share up 2.7 percentage points.

Concerns

2

  • APAC market share underperformance

  • Dilution from AI-generated music

Guidance & targets

CategoryTargetConfidence
Total revenue growth
high single-digit
high materiality
High
Adjusted OIBDA growth
double-digit
high materiality
High
Adjusted EPS growth
double-digit
high materiality
High
Operating cash flow conversion
50% to 60% as a percentage of adjusted OIBDA
high materiality
High
Margin expansion target
high end of 150 to 200 basis points
high materiality
High
Margin targets
mid-20s
high materiality
High
Margin targets
high 20s
high materiality
High
AI contribution to top and bottom line growth
material contributor
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Recorded Music
Growth led by subscription streaming, which benefited from healthy market growth, global market share gains, and PSM increases. Physical revenue driven by strong releases, and artist services by concert promotion and merchandising.
Subscription streaming growth (adjusted basis): 15%Ad-supported streaming growth (adjusted basis): 11%Physical revenue growth: 18%Artist services and expanded rights revenue growth: 33%
—13%——
Music Publishing
Continued strong momentum, with streaming as a key driver. Expanded global presence with publishing operations launched in India.
Streaming growth: 16%
—10%——

Product announcements

ProductTypeDetails
Confessions IIlaunch
Bring your Lovelaunch
New music from Charli XCX, Lizzo, Alex Warren, sombr, Tiesto, Teddy Swims, Kehlaniroadmap

Deals & partnerships

TuStreams Deal with a leading independent force in the Musica Mexicana space.

Enhances distribution capabilities and establishes a pipeline of emerging talent and catalog in the Musica Mexicana genre.

Revelator Acquisition of a cutting-edge independent digital music platform.

Provides cloud-based tools to streamline operations and financial reporting for artists, labels, and distributors, helping to better serve the independent community.

Netflix Multiyear first-look deal to produce documentaries. multiyear

Aims to produce documentaries about the lives, music, and legacies of popular artists and songwriters.

Paramount Multiyear first-look deal to produce theatrical live-action and animated feature films. multiyear

Aims to produce theatrical live-action and animated feature films about the lives, music, and legacies of popular artists and songwriters.

Unigram and William Morris Endeavor Partners who helped structure the Netflix and Paramount first-look deals.

Collaboration to structure significant content production partnerships.

Bain Joint venture deployed $650 million to acquire a number of heavyweight catalogs. $650M

The JV has a total capacity of $1.65 billion and focuses on iconic, high-margin catalogs with growth potential.

Laufey Deal with Grammy winner Laufey.

Part of Warner Chappell's continued success in signing prominent songwriters.

Dre Harris Deal with R&B hitmaker and Grammy-winning producer Dre Harris.

Part of Warner Chappell's continued success in signing prominent songwriters.

ERNEST Deal with chart-topping singer-songwriter ERNEST.

Part of Warner Chappell's continued success in signing prominent songwriters.

Risks & headwinds

APAC market share underperformance

unquantified

Mitigation:Recently appointed a new leader for the APAC region to drive improvement.

Dilution from AI-generated music current

No observed dilution; AI-generated music accounts for 1-3% of streams on Deezer (85% fraudulent) and <0.5% of listening on Apple.

Mitigation:Building contractual protections into negotiations with DSPs and focusing on AI monetization frameworks that respect copyright and ensure fair compensation.

What to watch in Q3 FY26

AI revenue contribution

starting in fiscal '27
Current not yet material
Target material contribution

Why it matters

AI is framed as a significant future growth driver and value creation opportunity for both top and bottom line.

At the same time, we are leading the industry in AI initiatives, which we believe will be a material contributor to our top and bottom line growth starting in fiscal '27.

Find out whether WMG delivers this. Inve re-checks your case every morning.

Q&A highlights

How are market share gains being achieved, and are they sustainable given past improvements?

Robert Kyncl emphasized that current market share gains are broad-based, a result of long-term foundational work, and driven by a strong pipeline management, focused catalog optimization (65% of revenue, leveraging AI tools), and disciplined distribution efforts including acquisitions like Revelator and TuStreams. He expressed high confidence in the sustainability of these gains.

“Our gains are not in one region or one country or one sales channel. It's broad-based other than APAC, as Armin mentioned. That is amazing to be able to say and value is contributing to growth in addition to volume. That is amazing to be able to say.”

asked by Peter Supino · answered by Robert Kyncl

2 min read 6 chapters

Detailed narrative

Strategic Pillars Driving Growth

Warner Music Group's strong Q2 results, including a 12% increase in total revenue and 24% increase in adjusted OIBDA, demonstrate the success of its strategy. This growth is underpinned by progress on three strategic pillars: growing market share, increasing the value of music, and becoming more efficient and effective. AI is being leveraged across all three pillars to enhance capabilities and drive results.

Market Share Gains & Artist Development

The company achieved significant market share growth in Q2, with U.S. streaming share up 1.1 percentage points and U.S. new release share up 2.7 percentage points. This success is attributed to developing new talent, consistent creative success with emerging and established artists globally, and effective catalog monetization. Examples include Bruno Mars dominating charts, PinkPantheress securing a Global #1, and Junior H launching #1 on Spotify's global and U.S. top album debut charts.

Catalog Monetization & AI

Catalog, representing 65% of Recorded Music streaming revenue, is a key focus. The company employs an 'always-on' marketing approach, reimagined for younger generations, and uses AI tools to stimulate engagement with its vast content library. AI helps create motion art, visualizers, and lyric videos quickly and cost-effectively, while proprietary models guide marketing focus, amplifying market share growth.

Increasing Value of Music & AI Strategy

Efforts to increase the value of music include PSM (per-stream monetization) increases, which contributed 3 percentage points to subscription streaming growth. The company is also creating new monetization frameworks with emerging AI platforms like Suno, which has 2 million subscribers paying an average of $12.50 per month, generating $300 million in annualized revenue. Partnerships with traditional DSPs for AI-powered premium tiers are also underway to enhance fan engagement and ARPU.

Operational Efficiency & Margin Expansion

Warner Music Group's journey to become more efficient is unlocking investment capacity in its core business. Strategic reorganization, tech investments, and the financial transformation program have enabled profitable growth. The company delivered margin expansion of 230 basis points in Q2, exceeding its full-year target for the second consecutive quarter, and expects to achieve the high end of its 150-200 basis points target for fiscal '26.

Capital Allocation & Inorganic Investments

The company maintains a disciplined approach to capital allocation, focusing investments on valuable repertoire markets, high-margin accretive catalogs, and distribution capabilities. The joint venture with Bain has deployed $650 million to acquire heavyweight catalogs with attractive return profiles. Bolt-on acquisitions like Revelator (independent digital music platform) and TuStreams (Musica Mexicana) enhance distribution offerings and pipeline of emerging talent.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.