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    Earnings call· Mar 2026(Q2 FY26)

    Warner Music Group Q2 FY26 earnings call WMG

    May 7, 2026 Source

    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

    8
    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

    2
    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%——

    Operational metrics

    21
    Total revenue growth
    12%YoY
    Q2 FY26

    Overall company revenue growth.

    Adjusted OIBDA growth
    24%YoY
    Q2 FY26

    Growth in adjusted operating income before depreciation and amortization.

    Adjusted OIBDA margin expansion
    230
    Q2 FY26

    Margin expansion for the quarter, ahead of the full year target.

    Adjusted net income growth
    41%YoY
    Q2 FY26

    Growth in adjusted net income.

    Adjusted EPS
    $0.4438% increase
    Q2 FY26

    Adjusted earnings per share for the quarter.

    Operating cash flow conversion ratio
    66%
    H1 FY26

    Conversion ratio as a percentage of adjusted OIBDA for the first half of the fiscal year.

    Cash balance
    $741M
    as of March 31, 2026

    Cash and equivalents balance at quarter end.

    Total debt
    $4.7B
    as of March 31, 2026

    Total debt outstanding at quarter end.

    Net debt
    $4B
    as of March 31, 2026

    Net debt position at quarter end.

    U.S. streaming share growth
    1.1
    Q2 FY26

    Growth in the company's overall streaming market share in the U.S.

    U.S. new release share growth
    2.7
    Q2 FY26

    Growth in the company's market share for new releases in the U.S.

    Catalog revenue percentage
    65%
    current

    Percentage of Recorded Music streaming revenue derived from catalog content.

    Madonna weekly streams increase
    24%vs baseline
    weekly

    Increase in Madonna's weekly streams due to catalog marketing campaign leading into new album.

    PSM contribution to subscription streaming growth
    3
    Q2 FY26

    Contribution of per-stream monetization increases to subscription streaming revenue growth.

    AI music uploads (Deezer)
    75,000
    daily

    Public data cited by management regarding the volume and impact of AI-generated music on a specific platform.

    AI music listening (Apple)
    <0.5%
    current

    Public data cited by management regarding the volume of AI-generated music listening on a specific platform.

    Suno subscribers
    2M
    current

    Number of subscribers for the AI platform Suno.

    Suno annualized revenue
    $300M
    annualized

    Annualized revenue generated by the AI platform Suno.

    Bain JV deployed capital
    $650M
    to date

    Capital deployed by the joint venture with Bain for catalog acquisitions.

    Bain JV total capacity
    $1.65B
    total

    Total capacity of the joint venture with Bain for investments.

    Investment returns (portfolio)
    20%
    current

    Approximate return generated on the company's investment portfolio.

    Industry KPIs

    2
    MetricValueDetails
    ARPU arm$12.50USD
    Content spend title performance24%%

    Product announcements

    3
    ProductTypeDetails
    Confessions IIlaunch
    Bring your Lovelaunch
    New music from Charli XCX, Lizzo, Alex Warren, sombr, Tiesto, Teddy Swims, Kehlaniroadmap

    Deals & partnerships

    9
    TuStreamsDeal 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.

    RevelatorAcquisition 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.

    NetflixMultiyear first-look deal to produce documentaries.multiyear

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

    ParamountMultiyear 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 EndeavorPartners who helped structure the Netflix and Paramount first-look deals.

    Collaboration to structure significant content production partnerships.

    BainJoint 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.

    LaufeyDeal with Grammy winner Laufey.

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

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

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

    ERNESTDeal with chart-topping singer-songwriter ERNEST.

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

    Risks & headwinds

    2
    APAC market share underperformance

    unquantified

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

    Dilution from AI-generated musiccurrent

    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

    5

    AI revenue contribution

    starting in fiscal '27
    Currentnot yet material
    Targetmaterial 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.

    Q&A highlights

    7

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.