UMG Universal Music Group NV

By Mauro Orru

Shares of Universal Music Group NV plunged in Thursday morning trading after first-quarter streaming revenue at the world's largest music company came below analysts' forecasts as the advertising industry continued to reel due to a challenging economic environment.

At 0855 GMT, Universal Music shares traded 4.2% lower at EUR20.13.

The record label behind the Weeknd, Billie Eilish and Taylor Swift said Wednesday that overall revenue climbed to 2.45 billion euros ($2.71 billion) from EUR2.20 billion the same quarter a year ago. Revenue from subscriptions grew 10.3% at constant currency to EUR1.01 billion, while streaming revenue contracted 2.2% to EUR315 million.

Universal's overall revenue beat UBS forecasts of EUR2.39 billion, but subscriptions growth fell short of consensus of 11.2% and the streaming-revenue decline came in worse than consensus of a 0.6% contraction, the analysts wrote in a note.

Adjusted earnings before interest, taxes, depreciation and amortization--a key profitability metric for Universal--increased to EUR522 million from EUR455 million, generating an adjusted margin of 21.3%. UBS analysts had forecast earnings of EUR516 million on a 21.6% margin.

The development in streaming revenue marks a downturn compared with the fourth quarter, when it grew 1.8% at constant currency. Streaming services boomed at the height of the pandemic as listeners turned to digital when coronavirus restrictions brought live concerts to a standstill, though the pace of growth declined in recent months.

Physical revenue, which includes CD and vinyl sales, jumped to EUR313 million from EUR237 million in the three months to the end of March. King & Prince, Morgan Wallen, Taylor Swift and TOMORROW X TOGETHER were among the top sellers for the quarter.

"Within recorded music the interplay between physical, which was materially better than expected, and streaming, which was slightly worse, will drive a level of concern," Citi analysts wrote in a research note.

Earlier this week, streaming giant Spotify Technology SA said first-quarter revenue increased 14% to EUR3.04 billion, slightly short of the EUR3.1 billion the company expected due to macro-related variability in the ad business.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

April 27, 2023 05:15 ET (09:15 GMT)

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