Universal Music Earnings: Business Remains Strong, and Artificial Intelligence Fears Are Overstated

• : €31
• : ★★★★★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : Medium

What We Thought of Universal Music Group’s Earnings

Excluding the effect of currencies, which have weighed heavily on results over the past year, Universal Music’s sales growth accelerated in 2025, including during the fourth quarter. Investment needs have been high but are paying off, and we expect further sales acceleration in 2026.

Why it matters: Universal’s stock has been punished, which we attribute mostly to fears that artificial intelligence-generated listening will cannibalize traditional, human-created music from the artists Universal represents. In our view, Universal’s power in its industry substantially limits any long-term detriment.

• Universal has struck deals with multiple AI-music firms so that it can monetize and monitor AI music creation and consumption that is enabled by music it controls. As long as consumers treat AI-generated music as a complement rather than a replacement for traditional music, Universal is insulated.
• Recent deals struck with subscription streaming platforms protect against AI songs on those platforms diluting Universal’s revenue pool, and licensing deals struck with AI music firms to allow use of Universal’s music keep creations from leaving those platforms.

The bottom line: We maintain our €31 fair value estimate, driven primarily by our view that growth from streaming platforms, which make up over 60% of sales, remains high.

• Excluding the impact of currencies and nonrecurring items, subscription revenue from Universal’s recordings on streaming platforms—Universal’s largest source of revenue—rose 9.6% during the fourth quarter and nearly 9% in 2025, driven mostly by subscriber growth.
• With recent Spotify price increases and new deals taking effect with many platforms in 2026, we expect a further acceleration in 2026. Universal’s control of music from the most popular artists—the main factor behind the wide moat we assign—gives it significant negotiating leverage over streaming platforms and others in the industry, providing an upper hand in the age of AI.