Earnings call transcript: Universal Music Group tops EPS estimates in Q3 2026

Universal Music Group reported Q3 2026 earnings that exceeded profit expectations and met revenue forecasts. Adjusted earnings per share (EPS) reached $0.2509, surpassing the $0.2455 forecast by 2.2%. Meanwhile, revenue was $3.39 billion, matching investors' expectations and reflecting a 12.0% year-over-year increase.

The stock experienced a sharp rise in after-hours trading, surging 8.58% to $17.09. This marked a 7.89% increase from the previous close, signaling investor enthusiasm for the company's strong subscription growth, margin expansion, and strategic focus on streaming and artificial intelligence.

Key highlights of the earnings report include:

- Adjusted EPS of $0.2509 edged above the $0.2455 forecast by 2.2%.

- Revenue totaled $3.39 billion, unchanged from the forecast and up 12.0% year-over-year.

- Adjusted EBITDA increased by 9.0% to EUR 729 million, with the margin expanding to 22.4%.

- Recorded music remained the primary growth engine, with revenue up 14.7% year-over-year and a margin of 26.2%, showing a 1.2 percentage point improvement.

- Subscription streaming revenue grew by 19.2% year-over-year, or 9.5% excluding Downtown, while music publishing revenue rose by 7.5%.

- Physical revenue expanded by 17.4%, driven by releases from popular artists such as Mrs. GREEN APPLE, Stray Kids, Olivia Rodrigo, The Beatles, Rolling Stones, and Ariana Grande.

- Merchandising revenue declined by 4.6% due to lower touring income compared to a strong prior-year period.

The company credited cost discipline and operating leverage for offsetting pressures from revenue mix and investment spending. Despite the modest earnings surprise, the broader positive momentum in subscription growth, the impact of the Downtown acquisition, and the company's confidence in future growth from streaming and AI-related products drove the stock's significant after-hours rally.

Universal Music Group's strong performance suggests that investors are optimistic about the company's long-term growth prospects, particularly in the streaming sector and through strategic acquisitions like Downtown Music.