Warner Music Group (WMG) shares jumped in Thursday's premarket session after the entertainment giant delivered a fiscal fourth-quarter earnings report that showed impressive top-line momentum, even if the bottom line came up a bit short.
The company posted earnings of 21 cents per share for the quarter ended September 30, missing analyst expectations of 31 cents. But revenue told a different story entirely: Warner Music brought in $1.868 billion, a 15% jump from last year that sailed past the $1.682 billion Wall Street had penciled in. That revenue figure marks an all-time high for the company.
Breaking down the numbers, Recorded Music revenue climbed 15% year-over-year to $1.53 billion. Music Publishing wasn't far behind with 14% growth to $337 million. Digital revenue, increasingly the lifeblood of the music business, rose 8% to $951 million.
The Profit Picture Improves
Net income more than doubled to $109 million from $48 million in the year-ago quarter. That boost came primarily from favorable currency movements on the company's Euro-denominated debt, gains on intercompany loans, and a helpful tax benefit.
Adjusted OIBDA (operating income before depreciation and amortization) increased 15% to $405 million, though the margin held steady at 21.7%. Management attributed the solid profitability to revenue mix improvements and cost savings from ongoing restructuring efforts.
The balance sheet shows $532 million in cash and equivalents as of quarter-end. Operating cash flow did decline to $231 million from $304 million last year, but that was driven by timing differences in working capital rather than any fundamental weakness.
AI Opens New Revenue Doors
CEO Robert Kyncl struck an optimistic tone about the company's trajectory. He pointed out that Warner Music's artists and songwriters continue gaining momentum, with market share wins driving those record revenues. Volume and pricing increases are lifting the overall value of music, he noted, while emerging AI revenue streams are opening up additional growth opportunities that didn't exist before.
That AI comment is worth paying attention to. As artificial intelligence tools increasingly use music in training data and applications, record labels are negotiating licensing deals that create entirely new revenue categories.
WMG stock was trading up 2.39% at $31.23 in premarket action Thursday, suggesting investors are focusing more on the revenue beat and growth narrative than the earnings shortfall.
