Universal Music Group (UMG) experienced a significant drop in its shares, falling as much as 23% in Amsterdam to a record low of €14.88. This decline, the steepest since July 2024, came after the world's largest music company reported second-quarter subscription revenue growth that fell sharply short of analyst expectations. While UMG's total revenue increased by 13.3% in constant currency to €3,294 million, its subscription revenue growth stood at 16.6% in constant currency, including the impact of the Downtown Music Holdings acquisition. However, analysts had anticipated a 19.2% increase. Excluding the Downtown acquisition, subscription revenue growth was only 6.7% in constant currency, compared to 7.9% in the prior quarter, causing concern among investors regarding its streaming momentum. Adjusted EBITDA also missed estimates, coming in at €610 million against an expected €643 million.
The underperformance led to a 2.2 percentage point decrease in UMG's adjusted EBITDA margin to 20.5%, attributed to the Downtown consolidation, revenue and repertoire mix in Recorded Music, and a loss in its Merchandising unit, which saw revenue fall 10.7% in constant currency. Analysts from Morgan Stanley called the results a "Meaningful shortfall," and Barclays' Julien Roch noted, "Overall delivery on sub streaming and total streaming has been lacklustre." The market capitalization of UMG, home to artists like Taylor Swift and Chappell Roan, wiped out approximately €8.8 billion, bringing it to €26.6 billion. The selloff also impacted Vivendi, a major UMG shareholder, whose shares dropped 18%.
Despite the immediate concerns, some analysts, including JPMorgan, believe subscription trends could improve in the second half of the year due to strengthening market share momentum and an improved release slate. Management also indicated that a new Pandora agreement and Apple price increases are expected to provide additional pricing benefits. This substantial share drop occurs just two months after UMG rejected a $64 billion takeover bid from Bill Ackman's Pershing Square, deeming the offer an undervaluation.
Meanwhile, Roblox's shares slumped by 14% in after-hours trading after the online gaming platform forecast a lower-than-expected third-quarter bookings range of $1.58 billion to $1.65 billion, falling short of analysts' estimates of $1.77 billion. The company reported second-quarter bookings of $1.56 billion, which was in line with expectations, and daily active users (DAUs) were up 10% year-over-year, though they fell 7% sequentially to 123 million. The reduced forecast is attributed to changes in its recommendation algorithm, which has steered younger users towards lower-revenue games, and new safety measures, including age verification, which have created friction for user engagement and sign-ups. Chief Financial Officer Naveen Chopra acknowledged that "Monetization weakness is likely to continue" in the near term but expressed confidence that investments in AI, content diversification, and safety would improve long-term retention and ultimately offset the current hit to bookings.
