Warner Music Group NASDAQ: WMG reported fiscal third-quarter revenue growth and margin expansion, citing subscription price increases, streaming-market-share progress, cost reductions and strong cash-flow generation.
For the quarter ended June 30, total revenue rose 9%, or 11% on an adjusted constant-currency basis. Adjusted OIBDA increased 15%, producing 100 basis points of margin expansion. Operating cash flow increased 209%, lifting the company’s cash balance by roughly $100 million to $618 million.
CEO Robert Kyncl said the company had met or exceeded its targets for five consecutive quarters. He reiterated Warner Music’s long-term objectives of high-single-digit consolidated revenue growth, double-digit Adjusted OIBDA and adjusted EPS growth, and operating cash flow conversion of 50% to 60%.
Streaming, physical and publishing results
Recorded-music revenue increased 9%, led by 12% adjusted growth in subscription streaming revenue. Acting CFO Lou Dickler said subscriber growth contributed roughly 6% to 7% to subscription-streaming growth, while pricing added about 3.5 percentage points and market share accounted for about 1 percentage point.
Dickler said the pricing contribution reflects contractual per-subscriber minimum, or PSM, increases negotiated with digital service providers. Kyncl said the company now has PSM increases across 88% of subscription-streaming revenue, compared with none two years ago. Warner Music’s recently renewed agreement with Apple completed alignment with its major digital service partners on contractual pricing increases, according to Kyncl.
Ad-supported streaming revenue grew 10% on an adjusted basis. Dickler attributed the performance to a healthy advertising market, improved digital-service-provider economics and elevated spending related to the FIFA World Cup. He said the company expects ad-supported streaming growth to normalize to the mid-single digits in the fourth quarter, as World Cup-related spending does not recur.
Physical revenue increased 17%, supported by new releases as well as catalog and carryover sales. Artist services and expanded-rights revenue rose 15%, driven primarily by concert-promotion revenue in Japan and higher merchandising revenue. Licensing revenue declined 1%.
Music publishing revenue increased 11%, including 14% streaming growth. Sync revenue rose 7% and mechanical revenue increased 19%, while performance revenue declined 2%. Recorded music Adjusted OIBDA rose 16% to a 25.3% margin, up 150 basis points, while music publishing Adjusted OIBDA rose 14% to a 28.9% margin, up 70 basis points.
Management transition and cost initiatives
Kyncl addressed the departure of former CFO Armin Zerza, who stepped down for personal reasons. He said Zerza helped sharpen the company’s focus on capital allocation, forecasting and investor communications, and that those practices are now institutionalized. Global Controller and Chief Accounting Officer Lou Dickler is serving as acting CFO while Warner Music conducts a search.
Tom Corson, previously co-chairman and chief operating officer of Warner Records, has been named chief operating officer of Warner Music Group.
Kyncl said the company’s performance reflects a multiyear strategy that included restructurings in fiscal 2023 and 2024 totaling $300 million, alongside reinvestment in technology and artists and repertoire. Dickler said Warner Music remains on track to realize $200 million in savings during fiscal 2026 and $300 million on an annualized basis in fiscal 2027 from its 2025 restructuring plan.
The company expects to deliver fiscal 2026 margin expansion at the high end of its previously stated 150- to 200-basis-point range. Dickler said Warner Music continues to target margins in the mid-20% range in the short term and the high-20% range over the longer term.
Catalog, distribution and capital allocation
Kyncl said Warner Music’s year-to-date U.S. streaming share and U.S. new-release streaming share have increased. During the question-and-answer session, he said publicly disclosed U.S. data showed streaming share up 0.3 percentage points year to date and new-release streaming share up 0.8 percentage points, while noting that the company focuses primarily on global trends and longer-term performance.
The company is using proprietary artificial-intelligence tools across a catalog of more than 1 million songs to identify marketing opportunities, optimize music for streaming services and automate workflows. Kyncl cited Chris Rainbow’s 1979 recording “Be Like a Woman,” which grew from 50,000 streams during all of 2025 to more than 140 million streams so far this year after the company used those tools.
Warner Music also expanded its distribution operation through the acquisition of Revelator, a platform providing digital distribution, rights-management, royalty-accounting and analytics tools. The company recently entered distribution arrangements with GoDigital Music and Berlin-based AIM Music.
Kyncl said Warner Music’s joint venture with Bain Capital has deployed $650 million toward catalog acquisitions, out of $1.65 billion in capacity. He said the company is targeting roughly 20% returns on investments, including investments made through the Bain venture, and is focusing on high-margin catalogs with growth potential.
AI licensing and artist protections
Management said artificial intelligence represents a prospective revenue source but emphasized the need for artist and songwriter protections. Warner Music has licensing partnerships with Suno, Stability AI, KLAY and Udio, and expects AI licensing agreements to begin contributing materially to subscription-streaming revenue in fiscal 2027.
Kyncl said Suno remains on schedule to transition to a licensed model later this year. He also said operationalizing artist permissions is a complex and labor-intensive process for AI products, rather than a reflection of whether artists support the products.
On protections, Kyncl said Warner Music has agreements with distributors to take down deepfakes and has expanded arrangements requiring fully generative AI content to be identified and excluded from pro-rata revenue pools. He cited Deezer’s public data showing that more than 90,000 AI-generated tracks are uploaded daily, but said their consumption represents approximately 1% to 3% of total listening and monetization is a fraction of that level.
As of June 30, Warner Music had total debt of $4.7 billion and net debt of $4.1 billion. Management said it expects continued growth from global subscriber additions, pricing, catalog, distribution and future AI licensing revenue.
About Warner Music Group (NASDAQ:WMG)
Warner Music Group is a major global music company that operates across recorded music and music publishing. Its recorded-music business comprises a portfolio of well-known labels—including Atlantic, Warner Records and Parlophone—as well as distribution and artist-services operations that support both established and emerging artists. The company's publishing arm, Warner Chappell Music, manages songwriting catalogs and administers rights for compositions across multiple media, providing licensing for film, television, advertising and other commercial uses.
WMG's activities span the full music value chain: signing and developing artists, producing and marketing recordings, distributing music through physical channels and streaming platforms, and monetizing rights through licensing, synchronization and neighboring-rights collection.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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