VALUATION HIGHLIGHTS

1. Advertising constitutes 75% of the Trefis price estimate for Sirius XM Radio's stock.
2. Equipment, Royalties and Other Revenues constitute 13% of the Trefis price estimate for Sirius XM Radio's stock.
3. Satellite Radio Subscriptions constitute 12% of the Trefis price estimate for Sirius XM Radio's stock.

WHAT HAS CHANGED?

1. Sirius Q4 2025 Snapshot

The company reported quarterly revenue of $2.19 billion, slightly above the consensus estimate of about $2.17 billion for the period, reflecting essentially flat year-over-year sales and modest upside relative to forecasts. On the bottom line, EPS came in at $0.24, which was a significant miss against the roughly $0.78 consensus estimate that analysts had anticipated.

Despite this EPS shortfall, the quarter delivered some strengths: adjusted EBITDA rose slightly to about $691 million from $688 million a year earlier, and free cash flow reached a Q4 record of $541 million, up about 5 percent year-over-year. Subscriber trends showed modest improvement, with approximately 110,000 self-pay net additions helping to stabilize the base and support a slight increase in ARPU to around $15.17 for the quarter.

2. Guidance for FY 2026

Management expects total revenue of approximately $8.5 billion, essentially flat with the $8.56 billion reported for 2025, indicating that top-line growth is likely to be modest as subscriber revenue pressures persist and broader market dynamics in audio entertainment remain competitive. On profitability, adjusted EBITDA is also guided to about $2.6 billion, roughly in line with the prior year result of $2.67 billion. A key emphasis in the 2026 outlook is free cash flow growth, with guidance calling for about $1.35 billion in cash flow generation. That would represent an increase from the $1.26 billion delivered in 2025 and underscores management’s focus on cash conversion and financial flexibility. Sirius XM pointed to disciplined capital allocation, lower net capital expenditures following recent satellite deployments, and productivity improvements as drivers of this free cash flow expansion, while also highlighting a longer-term target of about $1.5 billion in free cash flow by 2027.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Sirius XM's value that present opportunities for upside or downside to the current Trefis price estimate:

• Number of Sirius XM Subscribers: We currently forecast this figure to increase from 32.9 million in 2025 to about 36 million by the end of the Trefis forecast period. If subscriber additions accelerate and Sirius XM reaches a subscriber base of about 40 million by the end of the Trefis forecast period, there could be an upside of about 10% to the Trefis price estimate. This could happen if the company can further increase its penetration and success rate in new as well as used cars. On the other hand, if competition from Spotify and other radio/online audio streaming services further intensifies and the subscriber additions slow down to around 32 million subscribers from current levels by the end of the Trefis forecast period, there could be a 10% downside to the Trefis price estimate.


• Sirius XM's Average Revenue Per Subscriber: We currently forecast this figure to increase from $197 in 2025 to about $222 by the end of the Trefis forecast period. If more subscribers upgrade to a higher-priced tier and, as a result, the average revenue per subscriber reaches more than $230 by the end of the Trefis forecast period, there could be an upside of about 5% to the Trefis price estimate.

BUSINESS SUMMARY

The satellite radio service provider offers channels comprising commercial-free music, sports, talk shows, news stations, and other channels in the U.S. Sirius XM radio channels are mainly available through receivers in automobiles, but can also be accessed over the internet or through home stereos by using various accessories.

The firm's satellite radios are primarily distributed through automakers ("OEMs"), retail locations, and through their website. Sirius XM has ties with major automobile manufacturers such as Ford, GM, and Toyota. This helps drive its presence in the US automobile space. Additionally, satellite radio services are also offered to customers of certain rental car companies.

The firm's primary source of revenue is the subscription fee it charges customers for annual, semiannual, quarterly, or monthly subscriptions. Additionally, the company derives revenue from activation fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services such as weather, traffic, data, and backseat TV services.

As of December 31, 2025, our SiriusXM business had approximately 32.9 million subscribers.

SOURCES OF VALUE

Pandora Acquisition

Sirius XM completed the acquisition of Pandora for $3.5 billion in an all-stock deal in early 2019. Pandora was supposed to give Sirius XM a foothold in streaming and a way to consolidate two ad-supported platforms, but Pandora's audience has contracted in back-to-back years. As of Dec 31, 2025, Pandora had approximately 41.1 million monthly active users (down 5% y-o-y) and 5.6 million subscribers(-2%).

Subscription fee

Sirius XM earns the majority of its revenues from the subscription fee it charges its subscribers. It offers various monthly, semi-annual, and annual plans to customers. The company also offers discounts on long-term subscriptions and on multiple subscriptions. The All Access plan (Car + app) is typically listed at about $24.98 per month after promotional pricing ($1 for the first 3 months). This gives subscribers access to the full Sirius XM lineup, including music, live sports, talk and news on both satellite and streaming. Sirius XM also offers All Access (App Only) for streaming-only access at about $9.99 per month after introductory pricing.

Sirius XM in Cars

Sirius XM has contracts with nearly all major automobile manufacturers. Every year, the firm pays out a large amount to its OEM (original equipment manufacturers) partners to keep their radios flowing into the new car market, at around a 75% penetration rate. Of this 75% who buy a car with satellite radio, 39%-40% choose to keep it after the promotion trial runs out.

• General Motors:

  Sirius XM has a deal with GM which allows it to install its satellite radios in GM vehicles. This deal was valid through 2027, and GM increased vehicles equipped with Sirius XM to nearly all Chevrolet, Buick, GMC, and Cadillac vehicles beginning with the model year 2021. In addition, the company also announced a significant expansion of its 360L platform at General Motors, which should further drive penetration.

• Toyota:

  Sirius XM has a deal with Toyota which allows it to install its satellite radios on all Toyota vehicles in the United States. This deal is valid until 2028.
• Sirius XM is also a partner for companies like Volvo, Mercedes-Benz, Honda, Ferrari, Kia, Bentley, BMW, Volkswagen, Hyundai, and Mitsubishi.
• Many trucks, boats, and recreational vehicles include Sirius XM radios as a standard fit.

KEY TRENDS

Used car market becoming important for Sirius XM

The used car market has become increasingly important for Sirius XM as new car penetration is already high, with factory installation rates above 80% in new vehicles, while U.S. new car sales average roughly 15 to 16 million units annually versus about 38 to 40 million used vehicle sales. Sirius XM estimates tens of millions of satellite-enabled vehicles reenter the used market each year with inactive radios, creating a lower cost pool for subscriber growth. Management has indicated that used car trials now represent a meaningful and rising share of total trials, while conversion costs are lower than in the new car channel because no hardware subsidy is required. With more than 100 million Sirius XM-enabled vehicles on the road and vehicles changing owners multiple times over their lifespan, the used car channel has become a critical driver of incremental subscribers and a stabilizing factor for long term subscriber trends.

Increasing competition

On-demand music streaming services are currently dominating the market, with Spotify being one of the leading players. Spotify is far ahead of its nearest rival Apple Music, and continues to add more subscribers - driven by expansion into new markets. Spotify surpassed 700 million monthly active users (about 713 million) and reached 281 million premium subscribers, with both metrics showing double-digit year-over-year growth (as of Dec 2025). And they can satisfy all of the content needs that a person might have, whether it's music, news, sports, or podcasts. Further, connected cars that allow smartphone apps to stream seamlessly through Bluetooth should dampen the subscriber growth in premium-priced satellite-beamed platforms.

Ability to afford unique content

Sirius XM's business model is based on a subscription fee, and therefore, the company can afford unique and exclusive content that separates it from other radio services. The company will continue to sustain this ability and therefore, grow its user base. The company migrated certain premium content and features to lower tiered plans to increase the value to subscribers of these plans in an effort to retain existing subscribers. For example, Music & Entertainment plan now includes more sports content and the Howard Stern channels, and Platinum plan includes the ability to access three simultaneous streams so subscribers can share access with family members.

Howard Stern remains an active Sirius XM personality with a current contract extending his presence through 2028.

Connected services

In addition to offering listening content through satellite radio sets factory-installed in cars, Sirius XM offers connected services to car manufacturers through its subsidiary Sirius XM Connected Vehicle Services Inc. The company provides an array of features to enhance safety, security, and convenience. These include remote and assist services, automatic crash notifications, easy access to maps, weather, restaurants, and points of interest, scheduling service appointments, repairs, etc. Currently, Sirius XM provides connected services to Acura, BMW, Hyundai, Honda, Infiniti, Jaguar, Land Rover, Lexus, Nissan, Subaru, and Toyota. With new car sales increasing steadily, connected services should provide buyers an incentive to subscribe to Sirius XM services, which should keep its growth running. Coupled with the huge opportunity in the used car domain, this paints a pleasing picture for Sirius XM's future.