Warner Music Group Corporation (WMG.OQ): Eyes to FY27 and updates on AI

F4Q preview: We expect WMG's F4Q results to reflect a continuation of broader music industry trends, with investor attention likely focused more on the FY27 outlook and strategic priorities. WMG has undergone several recent management changes, creating some uncertainty, though the company has been forward-thinking on AI, including through its relationship with Suno. Investor attention remains focused on AI, which presents both risks and opportunities; WMG has not yet come to an agreement with Spotify, but we remain confident a deal would likely be consummated given the framework set by the UMG agreement. We see a path to win-win outcomes if AI-enabled premium tiers can drive further monetization of music content. We maintain our F4QE revenue of $1.91bn and adj. OIBDA of $435mn; for FY27E we maintain revenue and adj. OIBDA of $7.76bn and $1.96bn. We modestly lower our FY27/FY28E operating cash flow to $1.10bn and $1.23bn. We reiterate our Neutral rating and $30 PO.