Pandora's Q3 2025: Contradictions in Podcasting Growth, Pricing Strategies, and Subscriber Projections

Date of Call: October 30, 2025

Financials Results

• Revenue: $2.16B, essentially flat YOY (down <1%)
• Gross Margin: SiriusXM segment gross margin 59% (down 1 point YOY); Pandora & Off‑platform gross margin 31% (segment gross profit down 9% YOY)
• Operating Margin: Adjusted EBITDA margin 31% (Adjusted EBITDA $676M, down 2% YOY)

Guidance:

• Increased full‑year 2025 guidance by $25 million across revenue, adjusted EBITDA and free cash flow.
• New 2025 guidance: Revenue ~$8.525B; Adjusted EBITDA ~$2.625B; Free Cash Flow ~$1.225B.
• Reiterated longer‑term targets: free cash flow ~$1.5B by 2027 and target net debt/adjusted EBITDA in the low‑to‑mid 3x range (expected late next year).

Business Commentary:

* Revenue and Financial Performance: - Sirius XM Holdings reported total revenue of $2.16 billion for Q3, essentially flat year-over-year, down less than 1%. - The flat revenue was primarily due to lower subscriber revenue, while advertising revenue grew by $5 million to $455 million. - Free cash flow increased to $257 million, up from $93 million in the third quarter of 2024, driven by the absence of Liberty Media transaction-related costs and reduced capital expenditures.

• Subscriber Trends and Acquisition Initiatives:
• Self-pay net adds were negative 40,000, driven by a pullback in streaming marketing spend and lower conversion rates.
• The company expects ongoing progress in new acquisition initiatives, such as the expansion of the 3-year automotive dealer subscription program and the Podcasts+ offering.

• Subscribers for Q3 were in line with expectations, with self-pay net adds down versus last year, mainly due to the marketing spend reduction.

• Advertising Revenue and Podcasting Growth:

• Advertising revenue grew by $5 million to $455 million, with podcast revenue up nearly 50% year-over-year.
• The growth in podcasting was driven by increased marketplace demand and new partnerships, such as deals with SmartLess Media and MrBallen.

• The company plans to expand monetization opportunities with new partnerships and initiatives, such as the integration of the Amazon DSP for programmatic advertising.

• Financial Guidance and Leverage:

• Sirius XM increased its full year 2025 guidance by $25 million across revenue, EBITDA, and free cash flow.
• The company is committed to achieving its leverage target by late next year, maintaining flexibility to enhance shareholder returns and pursue strategic opportunities.
• They ended the quarter with a net debt to adjusted EBITDA ratio of 3.8x, slightly above their long-term target in the low to mid-3s.

Sentiment Analysis:

Overall Tone: Positive

• Management raised full‑year guidance by $25M and set 2025 targets of ~$8.525B revenue, ~$2.625B adj. EBITDA and ~$1.225B FCF; Q3 free cash flow improved to $257M from $93M a year ago; company highlighted content wins, podcast growth (~50% ad rev growth) and continued cost savings driving margin/cash improvement.

Q&A:

• Question from Stephen Laszczyk (Goldman Sachs): Where do the moving parts (streaming pullback, in‑car initiatives, trials, churn) leave you as you close out the year and look into 2026 for net adds?
  Response: Streaming marketing pullback cost ~300k net adds this year (largest impacts in Q1 and Q4); management expects in‑car acquisition programs (3‑yr dealer subs, OEM/EV initiatives, 360L) to drive improvement and offset declines over time, while monitoring auto sales trends.

• Question from Stephen Laszczyk (Goldman Sachs): How receptive is the base to this year's rate increases and pricing/packaging changes, and how do you see ARPU evolving into 4Q and 2026 with Play subs?
  Response: Rate increases were well received; lower‑priced packages and Play serve as promotional headlines but often lead customers to higher‑priced packages, so management expects ARPU to continue improving over time while balancing rate and volume.

• Question from Cameron Mansson‑Perrone (Morgan Stanley): Should we still think of an every‑other‑year pricing cadence or might you change frequency, and how do peers' pricing moves affect this?
  Response: Open to a shorter cadence (potentially ~18 months) but will add clear subscriber value before increases and monitor market/subscription fatigue and peer pricing as part of decisions.

• Question from Cameron Mansson‑Perrone (Morgan Stanley): How has podcasting grown as a share of the ad business and what is the opportunity for total ad growth going forward?
  Response: Podcasting ad revenue grew ~50% YoY and is taking a larger share of ad revenue; combined with unified buying, programmatic expansion and planned in‑car ad replacement next year, management expects continued ad monetization tailwinds.

• Question from Kutgun Maral (Evercore ISI): Can you share more on the spectrum portfolio and scope for monetization and how proceeds might be allocated?
  Response: Company holds ~35 MHz contiguous spectrum (25 MHz used + 10 MHz WCS); evaluating multiple value‑creation options (service enhancement, partnerships) and it's early—no decisions yet on monetization or proceeds allocation.

• Question from Barton Crockett (Rosenblatt Securities): Would selling spectrum be considered and could the licenses support other uses like satellite‑to‑cell connectivity given FCC dynamics?
  Response: Selling isn't the default—management is focused on finding the best opportunity (likely partnerships or uses that enhance the automotive business); the FCC appears more open to alternative uses, but no concrete plans announced.

• Question from Barton Crockett (Rosenblatt Securities): If automakers build their own interfaces, does being an economic partner with OEMs give SiriusXM an advantage versus services that aren't partners?
  Response: SiriusXM is well positioned with deep OEM relationships and enhanced CarPlay/Android Auto integration; the company will pursue both OEM IVI and platform routes to remain embedded for consumers.

• Question from Matthew Harrigan (Benchmark): How significant is the video monetization opportunity and how does your video ad‑tech compare to audio?
  Response: Video (YouTube and creator partners) is growing rapidly and complements in‑car audio; management is flexible on monetization (paywall vs. platform), leveraging top podcast/video assets to expand monetization beyond audio.

• Question from Omar Mejias Santiago (Wells Fargo): What inning are you in on cost reductions and where have you found the most efficiencies?
  Response: Company has exceeded the $200M cost‑savings target for the year; biggest efficiencies came from sales & marketing (reduced streaming/brand marketing), product & tech optimizations and lower CapEx, and structural/ongoing projects continue.

Contradiction Point 1

Podcasting Growth and Ad Revenue Strategy

It involves differing perspectives on the growth and monetization strategy for podcasting, which impacts the company's revenue projections and market positioning in the digital audio space.

What is podcasting's share of the overall ad business, and how will this impact total ad growth? - Cameron Mansson-Perrone (Morgan Stanley)

2025Q3: Podcast ad revenue grew 50% this quarter. It represents a larger portion of overall ad revenue with opportunities to improve streaming and satellite side ad performance. - Jennifer Witz(CEO)

Can you share details on podcast performance in the advertising mix and recent advancements in programmatic ad tech? - Barton Evans Crockett (Rosenblatt Securities)

2025Q2: Podcast advertising is up nearly 50% this quarter. Pandora represents about 55%-60% of total advertising revenue. - Jennifer Witz(CEO)

Contradiction Point 2

Pricing Strategy and ARPU Impact

It involves the company's approach to pricing and packaging, which directly affects subscriber retention, acquisition, and ultimately, revenue growth.

How is the customer base responding to recent rate hikes and pricing/packaging adjustments? What opportunities exist for ARPU growth? - Stephen Laszczyk (Goldman Sachs)

2025Q3: ARPU is on track for better year-over-year comparisons. Lower-priced packages like Play and music-only offerings have not cannibalized the full-price population. - Jennifer Witz(CEO)

What is the strategy for new pricing and packaging, and what is the expected impact on ARPU and net adds? - Steven Lee Cahall (Wells Fargo Securities)

2025Q2: We're simplifying in-car plans with a focus on enhancing value and reducing discounts. We expect ARPU trends to improve due to the March rate increase. - Jennifer Witz(CEO)

Contradiction Point 3

Pricing and Rate Increase Strategy

It involves the company's strategy regarding pricing and rate increases, which directly impacts revenue and customer retention.

Will you adopt a biennial pricing strategy, and how might peer pricing strategies influence your decisions? - Cameron Mansson-Perrone(Morgan Stanley, Research Division)

2025Q3: We are open to more frequent rate increases, possibly every 18 months, based on strong execution and delivering value ahead of increases. - Jennifer Witz(CEO)

Will the pricing cadence continue every other year, and will tariffs impact non-satellite CapEx? - Cameron Mansson-Perrone(Morgan Stanley, Research Division)

2025Q1: Our pricing has been every other year historically. And we have been able to execute on that with strong consumer responses. - Jennifer Witz(CEO)

Contradiction Point 4

Subscriber Net Adds and Expectations

It involves differing expectations and explanations for subscriber net adds and how they are expected to evolve over time, impacting revenue growth and investor expectations.

What factors are driving the improved subscriber net adds in Q3, and where do you stand on each? What are your expectations for 2026? - Stephen Laszczyk(Goldman Sachs Group, Inc., Research Division)

2025Q3: Subscriber net adds are consistent with expectations due to reduced streaming marketing spend. The impact is greatest in the first and fourth quarters. In-car business is improving due to new acquisition programs. Streaming adjustments are expected to stabilize in 2026. - Jennifer Witz(CEO)

What is the outlook for net new adds in 2025 considering key drivers? Why is the adjusted EBITDA decline more severe in 2025 compared to 2024 despite pricing actions and cost savings? - Cameron Mansson-Perrone(Morgan Stanley)

2024Q4: For 2025, some one-time impacts like click to cancel and shorter post-trial promotions will affect the first half, resulting in a net loss of about 200,000 subscribers. Without these impacts, the company expects to be slightly better year-over-year. - Jennifer Witz(CEO)