Spotify Technology Q2 Earnings Call Highlights

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Spotify Technology (NYSE:SPOT) reported second-quarter results marked by accelerating revenue growth, record gross margin and subscriber growth that pushed its Premium base above 300 million for the first time.

Co-CEO Alex Norström said the company’s revenue rose 15% year over year on a constant-currency basis, accelerating from 14% growth in the first quarter. Gross margin reached a record 33.4%, while free cash flow continued to strengthen. Spotify added 7 million net subscribers during the quarter and ended the period with 300 million subscribers, exceeding its guidance by 1 million.

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“More people are choosing Spotify, they’re engaging more deeply, and they’re converting,” Norström said, adding that active days among global subscribers increased during the quarter.

Financial Results and Third-Quarter Outlook

CFO Christian Luiga said monthly active users, or MAUs, grew 12% year over year, including notable outperformance in Europe and North America. Spotify added 16 million net MAUs, which was 1 million below its forecast, and ended the quarter with 777 million users.

• Total revenue was EUR 4.8 billion, up 15% year over year on a constant-currency basis.
• Premium revenue increased about 16%, driven by 9% subscriber growth and 7.4% year-over-year growth in average revenue per user.
• Ad-supported revenue rose 3%, consistent with the first quarter.
• Operating income totaled EUR 655 million, above guidance of EUR 630 million, for an operating margin of 13.7%.
• Free cash flow was EUR 797 million, up 14% year over year.

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Gross-margin performance exceeded Spotify’s guidance by 30 basis points. Luiga said the result reflected quarterly timing shifts related to growth investments and a small one-time benefit from the cancellation of Canada’s digital services tax, which allowed Spotify to reverse an accrual from prior years.

For the third quarter, Spotify forecast 788 million MAUs, representing net additions of 11 million, and 305 million subscribers, or 5 million net additions. The company expects third-quarter revenue of approximately EUR 5 billion, representing 14% growth, gross margin of 32.9% and operating income of EUR 670 million.

Luiga said Spotify continues to expect advertising revenue growth to “inflect towards double-digit growth” in the second half of 2026. The company also expects both gross margin and operating margin to improve on a full-year basis, along with meaningful growth in free cash flow.

Free-Service Changes and Advertising Buildout

Spotify is making product and monetization changes in selected emerging markets, including adjustments to sign-up flows, reduced support for certain lower-end Android devices, changes to advertising load and limitations in the free tier. Norström said the moves are intended to create a higher-quality MAU base and improve monetization over time.

The changes are expected to affect third-quarter MAU growth, but Norström said they should not come at the expense of subscriber growth in the near term. He described the strategy as shifting toward a “monetization lever” after periods of strong user growth in emerging markets.

On advertising, the company said its automated sales channels represented nearly 40% of ad-supported revenue during the second quarter, up from just over 30% in the first quarter. Active advertisers rose 60% year over year to 33,000, according to Norström.

Spotify has completed its migration to an in-house advertising server, with Norström saying that 99% of impressions are now served through its proprietary ad stack. Luiga said the company’s direct-sales channel had experienced expected declines, but that price-optimization work in the channel was completed and it is now stabilizing.

Premium Features, AI and Live Events

The company highlighted several new products intended to increase engagement and expand the value of its Premium offering. Its Reserved ticketing feature, launched in the U.S. with Live Nation in June, has supported multiple tours and reserved nearly 100,000 tickets through Spotify. Norström said some allocations sold out and were increased by Live Nation during the run.

Spotify said Reserved is currently focused on adding value for Premium subscribers rather than direct monetization. The product gives eligible users earlier access to tickets while helping artists reach dedicated fans, Norström said.

AI-powered features were also a central focus of the call. Spotify’s DJ feature is used by roughly one-quarter of active users, while Prompted Playlist has attracted about 14 million users out of the first 100 million users to whom it has been rolled out. Söderström said early retention trends for Prompted Playlist are promising.

The company’s large taste model, which uses data from 3.4 trillion daily platform events, has been deployed in its autoplay recommendation system. Söderström said that in the first two months following deployment, active days increased, autoplay minutes and track saves rose significantly, and autoplay drop-off declined.

Spotify also said SongDNA has been used by more than 100 million subscribers, making it among the company’s fastest-adopted features. Other recently introduced or planned products include Talk to Spotify, Personal Podcasts, Studio by Spotify, Running Mode and audiobook Prompted Playlists.

Music Add-Ons and Cost Discipline

Norström said Audiobooks+ has surpassed $100 million in annual recurring revenue, while overall audiobook penetration among Premium listeners has more than doubled this year. He described add-ons as a way to drive structural ARPU growth beyond standard Premium price increases.

Spotify is also developing music remix and covers capabilities that would require artist consent, provide attribution and compensate artists, labels, publishers and songwriters. Following an agreement with Universal Music Group announced in May, Spotify said it reached a deal with Merlin, which represents more than 30,000 independent labels and distributors.

Söderström said Spotify does not need agreements with every major label before it begins a research preview of the remix product, though it wants as many participating artists as possible. He said the company plans to use listener preference data from early users to improve the model before a broader launch.

Spotify expects marketing and AI-related investments to add roughly EUR 200 million in operating expenses for 2026. Luiga said the expense increase is not structural, noting that headcount is expected to remain flat for the year. Söderström said the company’s AI costs are largely tied to compute and can be managed through its internal tools, model selection and usage controls.

About Spotify Technology (NYSE:SPOT)

Spotify Technology is a digital audio streaming company best known for its on-demand music service and a growing portfolio of spoken-word content. Founded in Sweden in 2006 by Daniel Ek and Martin Lorentzon and launched commercially in 2008, the company offers a cross-platform app that enables users to discover, stream and organize music, podcasts and other audio. Its primary consumer products include a free, ad-supported tier and a paid Spotify Premium subscription that provides ad-free listening, offline playback and higher-quality audio streams.

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