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Investing.com -- Universal Music Group (AS:UMG) shares fell more than 6% on Friday after second-quarter results met expectations, but lowered earnings forecasts and rising content costs overshadowed steady streaming growth and margin improvement.
The world’s largest music company reported total revenue of €5.88 billion for the first half of 2025, up 6.4% year-over-year, with adjusted EBITDA rising to €1.34 billion.
Adjusted earnings per share for the half came in at €0.48, ahead of consensus and Barclays (LON:BARC) estimates of €0.46.
In the second quarter, subscription streaming revenue rose 8.5% on a constant currency basis, aligning with Barclays’ forecast but slightly below the company-compiled consensus of 8.8%.
Management said this growth is expected to continue through 2025 before accelerating in 2026 due to “Streaming 2.0” deals with digital service providers.
Non-subscription streaming revenue increased 9.1%, driven by easier comparisons to the prior year, which included the partial anniversary of the loss of a premium music video license with Meta (NASDAQ:META) and a period off-platform with TikTok.
Adjusted EBITDA margin improved by 60 basis points to 22.7% in the quarter, supported by operating leverage, product mix, and cost savings.
UMG said it is advancing the second €125 million tranche of its ongoing cost-saving plan.
Despite operational progress, Barclays downgraded UMG’s EPS forecasts for 2025 through 2027 by 3% to 4%, citing increased foreign exchange headwinds and higher-than-expected net content investment, which also weighed on free cash flow.
Merchandising revenue fell 12.7% in the second quarter and declined €36 million, or 10%, in the first half.
The segment posted a negative adjusted EBITDA of €3 million, down €21 million from a year earlier, due to lower volumes and higher manufacturing and freight costs, including increased tariffs.
UMG said it continues developing “superfan” subscription tiers aimed at high-value consumers, though these offerings are still in early stages and are not yet reflected in financial results.
The company also reported progress on artificial intelligence protections. Management cited positive legislative developments in the U.S. and European Union aimed at safeguarding copyrighted works and artist rights.
UMG is incorporating AI-related clauses into licensing agreements to prevent unauthorized use of its content and ensure monetization.
Morgan Stanley (NYSE:MS) raised its price target on UMG shares to €30 from €29 and maintained an “overweight” rating, citing solid subscription trends and expected monetization from “Streaming 2.0” initiatives beginning in 2026.