Universal Music Group has suffered its biggest one-day share price fall since becoming a publicly listed company in 2021 after investors reacted negatively to weaker-than-expected subscription revenue growth.

The world’s largest music company, which represents artists including Taylor Swift, Lady Gaga and Bad Bunny, saw its shares tumble 25 per cent on the Amsterdam stock exchange. The decline surpassed the previous record drop of 23.5 per cent recorded in July 2024, when disappointing streaming revenue also unsettled investors.

Although Universal reported second-quarter revenue of €3.29 billion, equivalent to around A$5.85 billion, much of the increase was boosted by the addition of Downtown Music Holdings, which became part of the company after Virgin Music Group completed its acquisition earlier this year.

Many analysts instead focused on the company’s underlying performance excluding the acquisition. Subscription revenue increased by 6.7 per cent during the quarter, falling short of market expectations of 9.3 per cent and slowing from the 7.9 per cent growth achieved in the previous quarter.

Profitability also failed to meet forecasts. Universal’s adjusted earnings before interest, taxes, depreciation and amortisation reached €664 million, or approximately A$1.18 billion, excluding the Downtown acquisition. That result came in below analysts’ consensus estimate of €703 million, equivalent to roughly A$1.25 billion.

Analysts at Bernstein described the quarterly performance as disappointing across multiple areas, suggesting hopes for stronger subscription and streaming growth may now be delayed until later in the year.

Subscription services remain one of the most closely watched parts of Universal’s business because they generate recurring revenue and underpin the company’s recorded music division, which contributes the majority of overall earnings. While music streaming experienced rapid expansion during the COVID-19 pandemic as consumers turned to digital entertainment, growth has moderated as the market has matured.

The latest decline extends a difficult period for Universal investors, with the company’s shares now down more than 40 per cent over the past 12 months. Expectations that streaming and subscription growth would rebound have so far failed to materialise.

The sharp sell-off also comes only a few months after Universal rejected a takeover proposal worth approximately A$99.5 billion from Bill Ackman’s Pershing Square Capital. The board unanimously concluded that the offer significantly undervalued the company.

Pershing Square had argued that Universal would benefit from a US stock market listing, claiming its valuation had been held back by uncertainty surrounding Bolloré’s ownership stake, the company’s capital management strategy and what it viewed as underutilisation of its balance sheet.

In response, Universal announced plans to increase its share buyback program from €500 million to €1 billion, equivalent to approximately A$1.78 billion. The company also said it intends to sell half of its roughly 3 per cent holding in Spotify Technology and use the proceeds to repurchase additional shares, a move designed to return more capital to investors.