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Warner Music Group (WMG) reported a 23% decline in annual profit for the fiscal year ending Sept. 30 on Thursday (Nov. 20), as restructuring costs and the end of the company’s BMG distribution deal weighed on revenue.
However, executives struck an optimistic tone during their earnings presentation, pointing to higher publishing and recorded music revenue, driven by subscription streaming growth, as evidence that their cost-cutting and reinvestment strategy was working.
WMG’s share price fell 2.66% on Thursday to $29.69. However, analysts at Guggenheim Partners, who have rated WMG a buy over the past few quarters, wrote in a note to investors that the company’s subscription streaming revenue and growth forecast is “encouraging.”
“We modestly raise our [full year 2026] revenue … estimates primarily reflecting higher subscription revenue as a result of pricing adjustments,” Michael Morris, equity analyst at Guggenheim, wrote on Thursday.
Here are a few of the highlights from WMG’s earnings presentation and filings.
Digital music revenue growth and market share improvement
WMG’s digital income improved by 3% in the year, helped by two straight quarters of recorded music streaming growth. Music subscription streaming rose by 8.5% during the quarter. Ad-supported streaming grew by 3%.
This was driven by hits from sombr, whose “Back to Friends” has spent 33 weeks on the Billboard Hot 100, Cardi B’s Am I The Drama?, which has spent the past two months on the Billboard 200, and Twenty One Pilots, whose Breach had the best debut week for a rock album in six years.
On an earnings call, WMG CEO Robert Kyncl noted that the company’s share of the Spotify Top 200 grew “by around 6 percentage points versus fiscal 2024” and that it “had the No. 2 market share” for the full quarter.
Meeting savings goals by using AI for dealmaking
WMG is on track to meet its goal of cutting internal costs by $200 million in 2026 and $300 million in 2027, said Armin Zerza, WMG’s CFO. Because the company is investing more in front-line artist development and key regions and genres, Zerza added, it has focused on savings in back-office functions.
In addition to introducing the cloud-based finance software SAP in Zerza’s department and using data to tailor marketing spend, WMG is working with an AI company to help “optimize” its mergers and acquisitions strategy, Zerza added.
Ultimately, the company’s cost savings plan, along with other growth, is expected to drive a 150 to 200 basis point improvement in WMG’s adjusted operating income before depreciation and amortization (OIBDA) margins.
Details on the Tempo and Bain Deals
WMG’s February acquisition of 50.1% of Tempo Music was for a “consideration of $77 million, including transaction costs,” and it included the option to buy out the remainder of Tempo for $73 million before the end of November 2027, according to an SEC filing released Thursday. That acquisition saw WMG recognize $351 million in publishing copyrights and $88 million in recorded music catalogs, along with $13 million in cash and other assets. Also included in the acquisition was $311 million of asset-backed securities secured by some of Tempo’s catalog, according to the filing. The Tempo catalog includes rights to songs by Wiz Khalifa, Florida Georgia Line and Brett James.
Additionally, Warner disclosed in filings that as part of the joint venture it announced in June to acquire catalogs with Bain, it secured a $500 million line of credit.
Zerza said during the earnings presentation that WMG’s joint venture with Bain has a robust pipeline of deals they expect to begin announcing in 2026.
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