Warner Music Group (NASDAQ:WMG) reported fiscal first-quarter results for the period ended December 31, 2025, highlighting what executives described as a third consecutive quarter of “strong, profitable growth,” supported by continued streaming gains, margin expansion, and improved cash flow. Management emphasized progress across its three strategic priorities—growing market share, increasing the value of music, and driving efficiency—while repeatedly pointing to artificial intelligence partnerships as a long-term growth and margin lever.
Quarter highlights: revenue up 7%, adjusted OIBDA up 22%
CEO Robert Kyncl said the company’s momentum continued into the new fiscal year, with total revenue increasing 7% and recorded music subscription streaming up 9% on an adjusted basis. He also pointed to profitability gains, noting total adjusted OIBDA increased 22% and margin expanded by 310 basis points.
In other areas of recorded music, Zerza said physical revenue declined 11% due to a difficult comparison in the prior-year quarter, which included releases from Linkin Park and releases in Japan and Korea. Artist services and expanded rights revenue increased 13%, driven by concert promotion revenue primarily in France.
Music publishing revenue grew 9%, which Zerza said reflected the impact of MLC historical matched royalties in the prior-year quarter. Excluding that notable item, publishing revenue grew 15%, with double-digit growth across performance, mechanical, sync, and streaming.
Cash flow, balance sheet, and cost savings
Zerza said adjusted OIBDA margin improvement was supported by operating leverage, the company’s cost savings program, and favorable foreign exchange movements. Operating cash flow grew 33%, and the company posted an operating cash flow conversion ratio of “nearly 100% of adjusted OIBDA” for the quarter.
As a result, Warner’s cash balance increased by more than $200 million from the prior quarter to $751 million, Zerza said.
On efficiency efforts, Zerza said the company’s cost savings plan was “delivering on schedule” and is expected to contribute 150 to 200 basis points to margin in fiscal 2026. He added that management believes a margin in the mid-20% range is achievable in the short term, with a longer-term goal of margins in the high 20% range.
He also noted a housekeeping item related to the roll-off of BMG digital distribution revenue, which he said was now largely completed. Warner plans to provide year-over-year adjustments for the remainder of fiscal 2026; the impact was $6 million in Q1 and is estimated at approximately $10 million in each of Q2, Q3, and Q4.
Market share gains and release momentum
Kyncl said Warner continued to improve market share, citing approximately one percentage point of U.S. streaming market share growth versus the prior-year quarter. He also said Warner’s market share on Spotify’s Top 200 chart was up three percentage points fiscal year to date.
Management highlighted recent and upcoming releases, including Zach Bryan’s album With Heaven on Top reaching No. 1 on the Billboard 200 and Bruno Mars’ single “I Just Might” reaching No. 1 on the Billboard Hot 100 as well as Spotify’s U.S. and global charts. Kyncl said Mars’ first new solo album in a decade, The Romantic, is set to release on February 27, and noted both Zach Bryan and Mars are signed to Warner for recorded music and publishing, which he described as a “One Warner” approach.
Internationally, Kyncl said Warner scored No. 1 releases in multiple markets, including France, Italy, Spain, the Netherlands, Finland, Korea, and China, as well as on the Billboard Latin Airplay chart.
He also discussed Warner’s global catalog division and an “always-on marketing” approach. As an example, Kyncl cited music placements in Netflix’s Stranger Things, saying the season’s syncs led to major streaming increases and chart movement for songs by Prince, David Bowie, and Fleetwood Mac. Kyncl said Prince’s “Purple Rain” saw a more than 600% year-over-year increase in weekly streams following the season finale’s premiere, and that baseline streams later settled at a level six times higher than before the sync. For Bowie’s “Heroes,” he said weekly streams rose more than 300% year over year and the baseline settled at 2.5 times higher than before.
AI partnerships and “super fan” tiers: strategy and economics
A central theme of the call was management’s view that AI can support all three strategic priorities. Kyncl said Warner is using AI to accelerate artist discovery and scale marketing, and also to create catalog assets—such as motion art and music videos—more quickly and inexpensively to stimulate engagement. He also described creator-facing initiatives including workshops and songwriting camps to help artists and songwriters use new technologies.
On monetization, both Kyncl and Zerza tied AI to the potential development of higher-priced “super fan” offerings and audience segmentation. Kyncl said Warner is already in discussions with partners about deeper engagement and higher price tiers, and later confirmed the company is in discussions with DSP partners about AI-related enhancements.
Kyncl reiterated principles he said are “non-negotiable” for Warner’s AI strategy:
- Partners must commit to licensed models.
- Economic terms must properly reflect the value of music.
- Artists and songwriters must have the choice to opt in for uses of their name, image, likeness, and voice in new AI-generated recordings.
He said Warner recently signed a deal with Suno and referenced partnerships with Udio as well, while Zerza added that Warner’s completed AI deals include Suno, Stability, KLAY, and Udio. Zerza said the agreements are structured on a “consumption basis,” which he described as variable and designed to scale as partners grow, with “accretive economics.” He also said the platforms’ interactive offerings should result in higher ARPUs and that Warner expects the Suno partnership to begin benefiting the company in fiscal 2026, with material top- and bottom-line contribution starting in fiscal 2027.
M&A and Bain JV capacity increased to about $1.65 billion
Warner also discussed capital allocation and catalog acquisition plans. Zerza said the company uses M&A as an accelerant, focusing on “high-quality, accretive catalog acquisitions,” and described a “robust and growing pipeline.” He said Warner increased the capacity of its joint venture with Bain, with both Warner and Bain increasing equity commitments by $100 million each while maintaining the existing equity-to-debt ratio. This raises the JV’s total capacity from $1.2 billion to approximately $1.65 billion.
Zerza said the company plans to deploy a significant portion of the JV’s capacity by the end of the fiscal year and suggested additional announcements could come in the near future.
Looking ahead, management said it is not providing guidance, but highlighted several expected drivers: a release slate anchored by major artists, contractual DSP increases beginning in Q2 and layering through fiscal 2026, continued catalog and capability acquisitions, and the expectation that AI-related initiatives could contribute materially to revenue and margin beginning in fiscal 2027.
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.
