Sirius XM (SIRI)

Satellite radio and media company Sirius XM (NASDAQ:SIRI) announced better-than-expected revenue in Q3 CY2025, but sales were flat year on year at $2.16 billion. Its GAAP profit of $0.84 per share was 7.9% above analysts’ consensus estimates.

Company Overview

Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.

The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.

Competitors in the radio broadcasting and media services sector include iHeartMedia (NASDAQ:IHRT), Cumulus Media (NASDAQ:CMLS), and Urban One (NASDAQ:UONE).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Sirius XM’s 1.6% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Sirius XM’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.2% annually.

This quarter, Sirius XM’s $2.16 billion of revenue was flat year on year but beat Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

Sirius XM’s operating margin has been trending up over the last 12 months and averaged 1.5% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business.

This quarter, Sirius XM generated an operating margin profit margin of 22.8%, up 156.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sirius XM’s EPS grew at an unimpressive 3.9% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q3, Sirius XM reported EPS of $0.84, up from negative $8.74 in the same quarter last year. This print beat analysts’ estimates by 7.9%. Over the next 12 months, Wall Street expects Sirius XM’s full-year EPS of $2.83 to grow 7.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Sirius XM has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.3% over the last two years, slightly better than the broader consumer discretionary sector.

Sirius XM’s free cash flow clocked in at $257 million in Q3, equivalent to a 11.9% margin. This result was good as its margin was 10.8 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

Over the next year, analysts’ consensus estimates show they’re expecting Sirius XM’s free cash flow margin of 14.4% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Sirius XM historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 11.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Sirius XM’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Sirius XM reported $79 million of cash and $10.08 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.66 billion of EBITDA over the last 12 months, we view Sirius XM’s 3.8× net-debt-to-EBITDA ratio as safe. We also see its $235 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Sirius XM beat analysts’ revenue and EPS expectations this quarter. Overall, this print was quite good. The stock traded up 8.7% to $22.89 immediately after reporting.

Updated: December 3, 2025 at 10:09 PM EST

When considering an investment in Sirius XM, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Sirius XM doesn’t pass our quality test. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Sirius XM’s number of core subscribers has disappointed, and its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Sirius XM’s P/E ratio based on the next 12 months is 6.8x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $24 on the company (compared to the current share price of $21.32).