Did the Wheels Just Fall Off on Sirius XM in 2026?

Shares of Sirius XM (NASDAQ: SIRI) opened sharply lower on Thursday after posting mixed quarterly results.

The country's only satellite radio provider was in a good groove before this week's financial stumble. Sirius XM was rallying, soaring 63% this year through Wednesday's close. After six consecutive years of declining stock prices -- a brutal 72% belly flop over that time -- it seemed as if investors were finally starting to warm up to the creature comforts of a cash cow media business.

It was easy to make sense of the swoon as we headed into 2020. For a subscription service primarily consumed in cars, the COVID-19 lockdown was brutal. Folks weren't driving to work, school, or social activities. Nixing a monthly Sirius XM subscription was an easy way to pay for a sourdough starter, a Zoom room makeover, or home fitness gear.

This year's rebound also adds up. Revenue was turning marginally positive after three years of modest annual declines. The business was showing signs of bottoming out, and the chunky dividend was comfort food for income investors.

Let's take a quick look at Thursday morning's report before turning the radio knob to what it means for investors going forward.

Image source: Getty Images.

June bugs

Sirius XM's second quarter was disappointing -- judging by the stock's 8% drop at the market open on Thursday -- but the mixed performance might seem obvious right away. Revenue rose a mere 1% to $2.16 billion for the three months ending in June compared to last year's showing. Net income climbed 17% to $239 million, up 23% on a per-share basis to $0.70 (outpacing the actual earnings on a per-share basis because of Sirius XM's perpetual share buybacks). Free cash flow for the quarter jumped 48% to $593 million.

At first glance, this report may seem like a mullet -- short on the top but long the way down. In reality, it's the other way around, given market expectations. Analysts were targeting just $2.14 billion in revenue, so the performance was a top-line beat. Those same analysts were expecting a profit of $0.78 per share, resulting in a bottom-line miss.

The report wasn't as bad as the initial market reaction might suggest. Like many rallying stocks -- a rare place for Sirius XM to be in the first place, after years of its cascading stock chart -- it's just a matter of heightened expectations for a stock with an eightfold lead over the general market's 8% increase in 2026.

Reasons to be hopeful

The second quarter wasn't a textbook beat, but it was a classic raise. Sirius XM boosted its full-year guidance to $8.525 billion in revenue; $2.625 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA); and $1.375 billion in free cash flow. It's a $25 million uptick on all three fronts.

An observant naysayer may point out that after back-to-back quarters of marginal revenue improvement, $8.525 billion is less than the $8.56 billion it posted in 2025. Its adjusted EBITDA target is also just shy of the $2.67 billion it delivered last year. Free cash flow will improve from the $1.26 billion it generated in 2025, but it resets some turnaround expectations and timelines.

Sirius XM remains a cheap, high-yielding stock. It's trading for 13 times trailing earnings. Analysts will likely nudge their forward profit targets lower, but that growth should still be positive. The current dividend of 3.3% isn't as attractive as it was at the start of the year, when it was just above 5%, given the much lower stock price, but it's still a solid rate. The payout ratio is low enough to give Sirius XM room to maintain its cadence of annual distribution hikes.

Unlike many media stocks that seem to continue their downward spiral, SiriusXM is holding its ground in terms of subscribers. Despite a challenging environment of rising fuel prices and growing audio alternatives in the era of the connected car, Sirius XM has established a core base of roughly 33 million subscribers. Like Sirius XM star Howard Stern, the platform is still making waves and drawing crowds. The turnaround may take a bit longer than expected, but there is no setback in the recovery process.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoom Communications. The Motley Fool has a disclosure policy.