Universal Music Group head Lucian Grainge. Photo Credit: UMG
Universal Music Group (UMG) has reported a double-digit revenue increase – and a more than 20% paid-streaming spike – for Q3 2026. But the showing hasn’t yet translated into share-price growth, and per CEO Lucian Grainge, the structure of the company’s “DSP agreements has to change.”
UMG shed light on its third-quarter results today, and as with the major’s prior post-Downtown-purchase financials, there’s a lot going on in the resource. First, overall revenue topped €3.39 billion (currently $3.80 billion), up 12.3% year-over-year (YoY) and 5.3% YoY in constant currency excluding Downtown (revenue from which hit $218 million/€195 million).
Meanwhile, Q3 EBITDA cracked $752 million/€672 million, up 13.1% YoY and 9.8% YoY in constant currency (CC) excluding Downtown. And the same percentage-growth trend – meaning higher figures when factoring for Downtown’s results – is apparent in other components of UMG’s earnings report.
This includes $1.59 billion/€1.42 billion in paid streaming recorded revenue (up 9.5% YoY in CC without Downtown and 20.7% YoY overall) and $433 million/€387 million from ad-supported listening (4.7% versus 14.8%).
Physical products including vinyl and CDs, for their part, generated $438 million/€392 million for UMG (up 15% YoY) without a contribution from Downtown.
“Downtown is the most important acquisition UMG has made since EMI,” Universal Music head Lucian Grainge said during the earnings call.
“This was a timely, strategic move, and we are only just beginning to realize the full benefits. The numbers are already proving why we made this deal, and we continue to capture upside in terms of additional capabilities, revenues, and synergies,” he proceeded.
Rounding out the recorded side, UMG identified $363 million/€325 million in license and other revenue (down 0.9% YoY and 2.8% YoY in CC excluding Downtown) and $37 million/€33 million (down 15.4%/30.8% YoY) from permanent downloads.
Top sellers on the quarter included Mrs. Green Apple, Olivia Rodrigo, Stray Kids, Ariana Grande, and The Beatles.
Shifting to publishing, Universal Music disclosed Q3 revenue of $660 million/€590 million (up 8.7% YoY and 1.5% YoY in CC excluding Downtown).
Therein, digital ($414 million/€370 million, up 13.1% YoY with Downtown and 3.9% YoY without) stands out for its relative growth. On the other hand, sync revenue fell almost 5% YoY without Downtown to $72 million/€64 million. Additionally, publishing EBITDA slipped 5.8% YoY to $144 million/€129 million.
“As we’ve discussed in recent quarters, music publishing results can be affected by the cadence of industry distributions and the timing of synchronization activity, which creates variability in quarterly growth rates,” CFO Matt Ellis indicated.
“That said, growth this quarter was below the level we expect from this business over time. We continue to believe this will be a mid-single-digit growth business in 2027.”
Finally, UMG’s merch and other revenue decreased by 4.2% YoY to $277 million/€248 million in part because of “lower touring income.”
Elsewhere during the earnings call, UMG higher-ups doubled down on their AI slop criticism – while also touting the perceived potential of partnership agreements with Klay Vision, Udio, and others.
“We are moving from principles to products, and from products to revenue. We expect these partnerships to begin generating incremental revenue in fiscal ’27,” Grainge said.
More interestingly, the Universal Music head took aim at DSPs for allegedly treating “AI slop as the same as the greatest songs in the world.”
“The uniform application of pro-rata payments makes the problem worse,” Grainge said. “By treating AI slop as the same as the greatest songs in the world, by some of the greatest artists. It incentivizes industrial-scale content production and dilutes the compensation earned by real talent.
“Put plainly, unethically generated AI tracks should never be compensated on the same basis as music that creates real and lasting demand. And why would a music service even want to host them?” he asked.
Running with the point – meaning the possibility of streaming services’ booting AI uploads or, more realistically, rolling out AI-free offerings within their broader ecosystems – Grainge proceeded to emphasize that “the structure of our DSP agreements has to change.”
“And UMG artists produced nearly half of the 900 music tracks streamed more than one hundred million times in the U.S. just last year. Streaming services depend on those artists, and the music that attracts subscribers and keeps them engaged.
“That’s why the structure of our DSP agreements has to change, so the compensation better reflects the value different content creates,” he spelled out.
Lastly, the major is also plotting “the next phase” of its transformation, with a particular focus on “securing win-win partnerships with DSPs.”
“I’m committed to extending our leadership in the years ahead by continuing to invest and develop career artists and securing win-win partnerships with DSPs that properly reward their work and ours. With that in mind, we’ve begun the next phase of our transformation, which will run through to the end of 2028,” Grainge added.
“We’ll build on the organizational redesign and look closely at how we negotiate, price, and execute platform agreements; how our central commercial organization operates; how our labels and international businesses are structured; and how we use data across the entire company. We’ll share more about this scope and financial objectives when we report our full-year results,” he concluded.
During today’s trading, Universal Music stock (UMG on the Euronext Amsterdam) finished at $17.71/€15.84 per share, up slightly from opening and down approximately 29% from 2026’s start.
