Earnings call transcript: Warner Music Q2 2026 beats EPS and revenue estimates

Warner Music Group (WMG) reported impressive financial results for its fiscal second quarter of 2026, significantly exceeding earnings and revenue expectations. The company posted an earnings per share (EPS) of $0.44, far surpassing the forecasted $0.27, marking a 62.96% surprise. Revenue reached $1.73 billion, beating projections of $1.61 billion by 7.45%. Following the announcement, Warner Music’s stock surged by 9.92% in after-hours trading, although it has since adjusted slightly, with a recent close at $32.69, down 2.71% from its post-earnings high.

Warner Music Group demonstrated strong performance in its fiscal second quarter, with revenue growth across all segments. The company, with a market capitalization of $17.05 billion, reported a 12% revenue increase in constant currency, driven by a 13% rise in recorded music revenue and a 10% increase in music publishing revenue. Over the last twelve months, revenue growth reached 12.6%, underscoring the momentum across its business lines. This growth reflects Warner Music’s successful strategic initiatives and strong market positioning. For investors seeking deeper insights, WMG is among the 1,400+ US equities covered by comprehensive InvestingPro Research Reports, which transform complex financial data into actionable intelligence.

Warner Music’s EPS of $0.44 exceeded the forecast of $0.27, representing a significant surprise of 62.96%. The revenue of $1.73 billion also surpassed the projected $1.61 billion, indicating strong business performance and effective execution of strategic initiatives.

Following the earnings announcement, Warner Music’s stock price surged by 9.92% in after-hours trading, reflecting positive investor sentiment. However, the stock has since adjusted slightly, closing at $32.69, down 2.71% from its peak post-earnings. This adjustment may reflect broader market conditions or profit-taking by investors.

The current valuation merits attention, as InvestingPro analysis indicates the stock is overvalued relative to its Fair Value, trading at a P/E ratio of 38.76. An InvestingPro tip notes the company is trading at a high earnings multiple, placing it on the Most Overvalued stocks list. Despite strong earnings, investors should weigh valuation metrics against growth prospects.

Warner Music continues to project strong future growth, with strategic initiatives such as AI-driven partnerships and content expansion expected to contribute significantly. The company is optimistic about sustaining its growth trajectory, supported by innovative product offerings and market expansion. The stock has delivered a robust 23% return over the past year and currently trades just 5.6% below its 52-week high of $34.63, reflecting strong investor confidence. Additionally, the company offers a dividend yield of 2.32%, having raised its dividend for six consecutive years—one of 10+ InvestingPro tips available for WMG subscribers.

CEO Robert Kyncl stated, "Our second-quarter results validate our strategic transformation initiatives and underscore our commitment to driving growth through innovation and operational excellence." CFO Armin Zerza added, "We are confident in our ability to sustain this momentum, leveraging our strong cash generation and strategic investments."

During the earnings call, analysts queried Warner Music’s strategies for sustaining subscription growth and the potential impact of AI initiatives on revenue. Executives emphasized the importance of strategic partnerships and innovation in maintaining competitive advantage and driving future growth.

Operator: Welcome to Warner Music Group’s second quarter earnings call for the period ended March 31, 2026. At the request of Warner Music Group, today’s call is being recorded for replay purposes, and if you object, you may disconnect at any time. Now, I would like to turn today’s call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Kareem Chin, Head of Investor Relations, Warner Music Group: Good afternoon, welcome to Warner Music Group’s Fiscal Second Quarter Earnings Call. Please note that our earnings press release, earnings snapshot, and Form 10-Q are available on our website. On today’s call, we have our CEO, Robert Kyncl, and our CFO, Armin Zerza, who will take you through our results and then answer your questions. Before our prepared remarks, I’d like to remind you that this communication involves forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non-GAAP results, including metrics that are adjusted for notable items during this conference call and in our earnings materials and have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website.

Please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there’s a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, and projections will result or be achieved. Investors should not rely on forward-looking statements as they are subject to a variety of risks, uncertainties, and other factors that can cause actual results that differ materially from our expectations. Information concerning these risk factors is contained in our filings with the SEC. With that, I’ll turn it over to Robert.

Benjamin Black, Analyst, Deutsche Bank1: Hello, everyone, thank you for joining us today. Our strong Q2 results prove that our strategy is working. With a 12% increase in total revenue, a 24% increase in adjusted OIBDA, and over 200 basis points of margin expansion, we are demonstrating the benefits of our transformation. This growth is underpinned by an increase in recorded music subscription streaming revenue of 15% on an adjusted basis. This was bolstered by the combination of broad-based strong execution by our operating units and by the successful implementation of contractual PSM increases that began in the quarter. We continue to make progress on our three strategic pillars, growing our market share, increasing the value of music, and becoming more efficient and effective. We use AI to help us achieve all three of these, which I’ll touch on throughout my remarks.

Starting with market share growth, which remains a primary objective, we’re driving gains through developing new talent and delivering consistent creative success with emerging and established artists and songwriters across multiple geographies, improved monetization of our catalog, and increased focus on distribution. Our execution across all of these has delivered strong year-over-year share growth in our fiscal Q2. Overall, U.S. streaming share grew 1.1 percentage points, and U.S. new release share grew 2.7 percentage points. Our creative success is evident in recent high-profile wins, including Bruno Mars dominating four Billboard charts simultaneously, PinkPantheress securing her first Billboard Global 200 number one, and Dan + Shay scoring his first number one album. Like Bruno, many of our current superstars are homegrown, Dua Lipa, Charli xcx, and many more.

You can go back decades in our history to artist discoveries like Led Zeppelin, Grateful Dead, Madonna, Prince, and many others who have launched and sustained highly successful careers at our labels. Flash forward to today, we continue to introduce the world to breakout chart-topping stars like PinkPantheress, Sombr, Della K, The Marías, and Alex Warren. These are just a few of the many examples of our outstanding track record in artist development. We’ve successfully transferred this capability around the world.

We’ve delivered a string of number ones from local artists in Italy, Poland, Sweden, France, Spain, and Mexico. Our rising Mexican star Junior H, for example, just launched at number one on both the Spotify Global and U.S. Top Album Debut charts. Turning to catalog, which represents about 65% of our recorded music streaming revenue, we’ve delivered growth across shallow and deep vintages.

Our always-on marketing approach, reimagined for today’s younger generation, is yielding results as we find new ways to continuously revitalize our timeless repertoire. In addition, we have great success introducing iconic artists to younger audiences through new releases. Madonna is just one great example. She became a Warner artist more than four decades ago, and we’re about to release her 14th studio album, Confessions II. As a result of our catalog marketing campaign leading into the new album, we’ve seen her weekly streams increase 24% versus baseline, with under 28-year-old fans accounting for 35% of her Spotify streams. Her new duet, Bring Your Love with Sabrina Carpenter, arrived last Friday and is Madonna’s highest charting track yet on Spotify and fueled her biggest-ever streaming day on the platform.

Additionally, our catalog is home to over one million tracks from more than 70,000 artists. AI tools that we’ve developed make it possible for us to stimulate engagement with this vast treasure trove of content quickly and cost-effectively through the use of motion art, visualizers, lyric videos, and many more. At the same time, we’re using our proprietary model to determine where our marketing activities should be focused. Our ability to create these assets quickly and inexpensively, combined with our focused marketing activities, enables better and deeper monetization of our catalog, ultimately amplifying our market share growth. Enhancing our distribution offerings through strategic partnerships and investments is an important driver of our market share growth strategy.

Our recent deal with