Concerts and Merchandise Fuel SM’s $191M Q1 2026 Growth Story

• SM Entertainment’s Q1 2026 revenue rose 20.6% YoY to $191M, boosted largely by strong concert and merchandise sales.
• Physical album sales almost doubled to 1.79M copies, backed by releases from EXO, NCT JNJM, and Irene.
• SM Entertainment is planning for a more aggressive M&A push alongside a Coachella-like K-pop festival alongside HYBE, JYP, and YG.

SM Entertainment posted a strong first quarter revenue in 2026. According to the company's quarterly report published on May 6, the revenue totaled ₩279.1 billion (~ $191 million USD), marking a 20.6% jump year-on-year. Nevertheless, shares closed 4.8% lower in Seoul, hitting the lowest in over two weeks.

Live Music and Merch Fuel SM’s Q1 Growth

SM’s growth story is attributed mostly to live music and merchandise. The agency’s concert revenues increased by 56% YoY to about $42M, backed by tours from legacy and new groups including Super Junior, NCT DREAM, aespa, RIIZE, and NCT WISH. Notably, the agency’s merchandise and licensing sector ranked close behind at $32.4M, showcasing a surge of 20%. The boost in SM’s merchandise and licensing sector is reportedly owed to the success of EXO's REVERXE THE WORLD pop-up, NCT WISH's WISH BAKERY event, and lightstick sales from aespa's world tour.

Digital Revenue Falls as Album Sales Surge Backed by EXO, NCT JNJM, and Red Velvet’s Irene

Amidst the growth of the merch and license segment, SM’s physical album and digital music revenue declined by 15% YoY to $39.3M. The dip in SM's earnings isn't really a sign of a slowdown, but rather a signal of returning to normal. The company’s growth last year was unusually high due to a unique windfall in digital music sales, which did not repeat this year. As a consequence, the latest numbers seem to be lower by contrast.

Despite the drop in physical album sales, an interesting story unfolded. Volumes of the albums sold nearly doubled, thus amounting to 1.79 million copies. This sales outcome was led by EXO's REVERXE (1.01 million), followed by NCT JNJM's Both Sides (520,000), and Red Velvet's Irene solo debut Biggest Fan (220,000).

SM’s DearU Consolidation Lifts Operating Profit

SM Entertainment’s operating profit rose by 18.5% YoY to $26.4M. This rise is partly being credited to the consolidation of DearU, the superfan platform that runs Bubble, which enables artists and fans to directly message each other. Currently, SM holds 45.1% stake of DearU, which reportedly contributed $16M in the first-quarter revenue of 2026. 

SM Entertainment CFO Jungmin Jang noted that ever since its consolidation, DearU has been able to “deliver stable earnings contributions.” Yet, net income collapsed by 85.5% YoY to $25M, allegedly owing to one-time gain from the DearU acquisition itself that took place in Q1 2025.

SM Bets Big on New Releases and M&As

The pipeline ahead for SM is huge. The Q2 and Q3 2026 will see full-length launches from the agency’s artists, including TAEYONG, YESUNG, aespa, and NCT 127, bolstered further by releases from SHINee, RIIZE, Red Velvet, and Super Junior. In the live events sector, aespa will head towards Brazil, Chile, Peru, Mexico, the US, and Canada in the upcoming Q3.

Additionally, the SM has reportedly filed a joint business combination report with South Korea's Fair Trade Commission alongside HYBE, JYP, and YG for a Coachella-like K-pop festival named “Fanomenon.” Meanwhile, SM’s Co-CEO Daniel Jang has also indicated an active merger and acquisition push. According to Music Business Worldwide, Jang said, “We will pursue M&A opportunities within music and related industries more actively than in the past three years.”