SPOT

It has been about a month since the last earnings report for Spotify (SPOT). Shares have added about 16% in that time frame, outperforming the S&P 500. But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Spotify due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts. Spotify Technology S.A. reported second-quarter 2026 earnings of $3.03 per share, missing the Zacks Consensus Estimate of $3.27 by 7.3%. The company had incurred a loss in the year-ago quarter. Higher marketing, cloud and artificial intelligence spending weighed on the bottom line. Revenues of $5.55 billion increased 14% year over year on a reported basis and 15% at constant currency. The figure beat the consensus estimate by a slight margin. Premium subscribers reached 300 million, exceeding management’s guidance by one million. Monthly active users, or MAUs, increased 12% year over year and 2% sequentially to 777 million. Spotify added 16 million MAUs during the quarter, one million below its guidance. Growth was recorded across all regions, with notable strength in Europe and North America. Premium subscribers rose 9% year over year and 2% from the prior quarter. Net additions totaled seven million, exceeding the company’s forecast by one million. Ad-supported MAUs advanced 14% year over year to 494 million, reflecting continued expansion of Spotify’s global audience. Premium revenues increased 15% year over year to €4.33 billion. On a constant-currency basis, revenues grew 16%, supported by subscriber gains and higher pricing. Premium average revenue per user increased 7% to €4.89, or 7.4% excluding currency effects. The benefits of price increases were partly offset by product and geographic mix. Management also highlighted improving engagement, with active days among global subscribers increasing. The company continues to add value through services such as Reserved concert-ticket access, personalized podcasts and additional audiobook offerings. Gross profit increased 21% year over year to €1.60 billion. Gross margin expanded 193 basis points to a record 33.4%, topping management’s forecast of 33.1%. Premium gross margin reached 34.9%, helped by revenue growth outpacing music costs, net of marketplace programs, audiobook expenses and video-podcast costs. Operating expenses increased 3% to €941 million. Excluding currency movements and social charges, expenses rose 19%, mainly because of temporary investments in marketing, cloud infrastructure and AI initiatives. Operating income climbed 61% to €655 million, while operating margin expanded to 13.7% from 9.7%. Ad-supported revenues increased 1% year over year to €446 million, or 3% at constant currency. Growth in music-advertising impressions was partially offset by softer pricing. Podcast advertising benefited from sponsorship gains across Spotify’s owned and licensed portfolio. Automated sales channels represented nearly 40% of ad-supported revenues, up from slightly more than 30% in the first quarter. Active advertisers increased 60% year over year. Management completed its price-optimization work and migrated ad inventory to an in-house ad server, supporting its expectation for double-digit advertising growth in the second half of 2026. Free cash flow increased 14% year over year to €797 million, marking a record second-quarter performance. The improvement reflected higher net income adjusted for noncash items, partly offset by working-capital movements. Trailing 12-month free cash flow reached €3.3 billion. Spotify ended the quarter with €9.4 billion in cash, restricted cash and short-term investments. The company repurchased $662 million of shares through Aug. 3, 30% more than during the comparable 2025 period. It has bought back nearly 2.2 million shares since resuming repurchases in 2025. For the third quarter of 2026, Spotify expects MAUs of 788 million, implying 11 million sequential additions. The outlook incorporates product optimization in emerging markets that is intended to improve free-to-paid conversion. Premium subscribers are projected to reach 305 million, representing five million net additions. Revenues are forecast at approximately €5 billion, indicating 17% year-over-year growth. Spotify expects a gross margin of 32.9% and operating income of €670 million. Management continues to anticipate about €200 million of incremental marketing and AI-related operating expenses in 2026, while expecting full-year gross and operating margins to improve. It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.06% due to these changes. Currently, Spotify has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for value investors. Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Spotify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. Spotify belongs to the Zacks Internet - Software industry. Another stock from the same industry, Palantir Technologies Inc. (PLTR), has gained 7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026. Palantir Technologies reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of +92.8%. EPS of $0.41 for the same period compares with $0.16 a year ago. Palantir Technologies is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of +95.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +8.7%. The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Palantir Technologies. Also, the stock has a VGM Score of D. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Spotify Technology (SPOT) : Free Stock Analysis Report Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Get insights on thousands of stocks from the global community of over 7 million individual investors at Simply Wall St. Spotify Technology has delivered a very large 3 year return, yet its current share price and valuation checks send a more mixed signal, with an intrinsic value estimate from a Discounted Cash Flow (DCF) model implying a discount to where the stock trades today. Spotify Technology has returned about 2.8x over the past 3 years, which raises the question of how much future upside is already reflected in the share price. Strong subscriber growth and new AI powered features can support investor confidence in future cash flows, while concerns around competition, royalty costs and the profitability of new products may limit how much investors are willing to pay for that growth. On Simply Wall St's broader checks, Spotify Technology scores 4 out of 6 for valuation, which points to a mixed picture rather than a clear bargain or clear overvaluation. The issue now is whether the current discount implied by the intrinsic value estimate offers enough compensation for the risks embedded in Spotify Technology's business and recent share price swings. Find out why Spotify Technology's -27.3% return over the last year is lagging behind its peers. The Discounted Cash Flow (DCF) approach estimates what Spotify Technology is worth today based on the cash it is expected to generate in the future. Spotify’s latest twelve month free cash flow is about €3.3b, and the 2 Stage Free Cash Flow to Equity model assumes those cash flows continue growing rather than shrinking over time. On these assumptions, the DCF model points to an estimated intrinsic value of about $707 per share. This sits above the current market price and indicates the stock screens as undervalued by roughly 29.1%. The recent drop after Spotify’s record Q2 2026 results and 300 million premium subscriber milestone helps explain why the market price still sits below this cash flow based estimate. Taken together, the Discounted Cash Flow work suggests Spotify Technology stock currently looks undervalued relative to its projected cash generation. Our Discounted Cash Flow (DCF) analysis suggests Spotify Technology is undervalued by 29.1%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Spotify Technology. P/E is a useful yardstick for Spotify Technology because the company is now reporting positive earnings that the market can price against. Spotify trades on a P/E of about 26.7x, compared with an Entertainment industry average of roughly 19.7x and a peer group average near 55.3x. The fair P/E ratio estimate for Spotify is about 26.5x, which is very close to the current market multiple. That fair ratio already folds in factors such as the company’s growth profile, margin structure, size and risk. The small gap between the current 26.7x and the 26.5x fair ratio suggests the stock is neither clearly cheap nor clearly expensive on earnings, especially when set against both its own fundamentals and the broader peer set. On the P/E measure, Spotify Technology stock currently looks priced at roughly a fair level relative to what its earnings profile would justify. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives pick up where the valuation work on Spotify Technology leaves off and spell out what kind of future for growth, margins and earnings would need to play out for the stock to be worth materially more or materially less than today’s price on the Community page. Rather than a single multiple or model output, each one lays out its own fair value assumptions so you can later compare those with Spotify Technology's reported results. Community views on Spotify Technology now sit far apart, with one side focused on AI and premium add ons and the other on valuation risk. Bull case: 17% undervalued Read the full Bull Case to see why Spotify Technology could be undervalued Bear case: 40% overvalued Read the full Bear Case to see why Spotify Technology could be overvalued Do you think there's more to the story for Spotify Technology? Head over to our Community to see what others are saying! For Spotify Technology, the Discounted Cash Flow (DCF) work points to meaningful upside based on projected cash generation, while the market multiple view says the P/E is now about right. That mix sits comfortably with the broader “mixed” valuation checks rather than a clear bargain or clear red flag. The real swing factor from here is whether Spotify can translate its product roadmap and user base into durable free cash flow and earnings, without royalty costs and competition eroding that thesis. The current discount only pays off if those cash flows arrive with fewer bumps than bears expect. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include SPOT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8 a.m. ET Head of Investor Relations - Bryan Goldberg Co-Chief Executive Officer - Alex Norström Co-Chief Executive Officer - Gustav Söderström Chief Financial Officer - Christian Luiga Operator: Hello, and welcome to the Spotify Q2 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Bryan Goldberg, Head of Investor Relations at Spotify. You may begin. Bryan Goldberg: Great. Thanks, operator, and welcome to Spotify's Second Quarter 2026 Earnings Conference Call. Joining us today will be our Co-CEOs, Alex Norström and Gustav Söderström; and our CFO, Christian Luiga. We'll start with opening comments from the team. And afterwards, we'll be happy to answer your questions. Questions can be submitted by going to slido.com, slido.com and using the code #SpotifyEarningsQ226. Analysts can ask questions directly into Slido, and all participants can then vote on the questions they find the most relevant. If for some reason, you don't have access to Slido, you can e-mail investor relations at [email protected], and we'll add in your question. Before we begin, let me quickly cover the safe harbor. During this call, we'll be making certain forward-looking statements, including projections or estimates about the future performance of the company. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed on today's call, in our shareholder deck and in filings with the Securities and Exchange Commission. During this call, we'll also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures can be found in our shareholder deck, in the financial section of our Investor Relations website and also furnished today on Form 6-K. And with that, I'll turn the call over to Alex. Alex Norström: Thank you, Bryan. Hey, everyone, thank you for joining us. I hope you're having a great summer. Today, we'll pick up where we left off at our Investor Day in May, updating you on what we said, what we've shipped since then and also what the early signals are telling us. So Q2 was another quarter of healthy broad-based growth. Revenue grew 15% year-over-year on a constant currency basis, accelerating from 14% in Q1. Gross margin hit a record of 33.4% and free cash flow continue to strengthen. And we beat our subscriber guidance crossing 300 million subs for the first time, all while continuing to grow engagement with a number of active days for global subs increasing. What pleases me the most is the shape of the quarter. More people are choosing Spotify, they're engaging more deeply and they're converting. We've been working on turning our outperformance in MAU into revenue growth. So to capitalize on this opportunity, we are adjusting elements like product optimization and ad load, among other things in select emerging markets. Now this strategy carefully increases friction in our free service with a goal of driving higher user conversion and revenue growth down the line. Yes, this will show itself in our Q3 MAU, but we believe it's well worth it. And as we've shared previously, the free-to-paid conversion cycle in emerging markets grows differently than our established markets. So while a move like this one will take time to play out, the opportunity is vast. This will be additive to our potential over time. And as you will hear soon from Christian, we do not expect it to come at the expense of our subscriber growth. Now we've talked about -- talked before about rebuilding our ads business and the results are really starting to show. On the supply side, our audience of very attractive global users keep expanding our inventory. And on the demand side, the enhanced technology we've deployed is making it much easier for advertisers to reach these engaged users. Just one example. Our automated channels represent nearly 40% of ad-supported revenue in Q2, up from over -- just over 30% in Q1. And active advertisers grew 60% year-over-year. We're now set up in a way we weren't a year ago, and we will keep building from here. Another development from the quarter worth calling out our launch of Reserved. At Investor Day, we called it one of the most wonderful improvements to premium in our history, and the early signs really back that up. So since launching in the U.S. in June with Live Nation, Reserved has supported multiple tours with nearly 100,000 tickets reserved through Spotify. For some tours, we sold through 100% of our allocations. And Live Nation upsized them mid-run. The biggest fans get first access, artist get their most dedicated audience in the room and every seat we fill makes a Spotify subscription just more valuable. I'd like to use the remainder of my time on something that Gustav and I think about a lot, Spotify's position. And these are unique times. Business history has produced just a handful of companies with hundreds of millions of recurring paying customers worldwide. And Spotify is proud to be one of them. And like many of the others, we built that scale on a single product. That is a unique territory to be in. I'm a student of Charlie Munger, who once said that the 1 structural advantage that matters disproportionately is scale. If you're choosing a music streaming for the first time, it matters that one brand comes with several hundred million passionate ambassadors. And perhaps most consequentially, the scale and the cash generation we now have lets us innovate and invest in building a much better product, adding more value for every subscriber around the world in the most cost efficient and competitive way. The point is scale matters. In the past 5 years, we've added more than 25 million net subscribers every year, growing in developed and emerging markets alike. So with over 300 million subscribers and 777 million users, we have achieved consequential scale. Our financial picture tells the same story. Since our last Investor Day in 2022, revenue has compounded at 18% a year, reaching EUR 17 billion in 2025. Gross margin went from 25% to over 33% this quarter. We became more disciplined with OpEx, which has turned into a growing positive operating margin. And last year, Spotify generated EUR 2.9 billion of free cash flow, and we expect that growth to continue. That strength is why we set the 2030 targets we did in May, a mid-teens revenue CAGR, gross margin of 35% to 40%, operating margin above 20% and strong growth in free cash flow. Gustav and I believe there are opportunities only Spotify is positioned to invest in because of our scale, the health of our business and our focus. So we rigorously explore new premium offerings and new verticals with our customers. We covered these at length at Investor Day, but there are a few that's worth repeating. The first is AI. Many investors ask about our Large Taste Model, which learns from the 3.4 trillion events our users generate on the platform every day. But the reality is we've been investing in AI-driven personalization for more than 7 years. Today, AI-powered experiences like DJ are used by roughly 1/4 of our active users. And Prompted Playlists, our newest addition, gives users direct control over the algorithm. Around 14 million of the first 100 million users we have rolled it out to are already using it, and the early retention improvements look promising. The second big area is the power law. As we've grown, we've observed that the usage of our products, features and content follows the power law. At the head of that curve are many millions of people who simply want more and they're willing to pay for it. Audiobooks prove it first in just a handful of initial markets. We see that overall Audiobooks penetration among premium listeners has more than doubled this year. And Audiobooks+, the add-on, has passed $100 million in annual recurring revenue. It's subscriptions on top of subscriptions with more on the way. So combined, these 2 just make for something powerful inference-driven products carry a marginal cost per use, so they need a compatible way to monetize. And that is exactly the muscle we've built over 20 years of freemium, feature-gated, usage-driven products optimized for the best value to price ratio. Now we will price and optimize these features and content just as we have successfully done with our premium product. So in conclusion, we have a scale that few companies in history have reached, a business that is healthy and compounding and opportunities only we are positioned to pursue. Spotify lives across your whole day, the commute, the workout, studying, gaming, dinner table and sleep. At our scale, that is rare. Most products own 1 or 2 contexts. Our position gives us an opportunity space as wide as our users want it to be. And at the Investor Day, we told you where Spotify is going. And this quarter, we're building momentum behind that. With that, let me hand it over to Gustav. Gustav Söderström: Thanks, Alex. I want to use my time on 2 things: how we're building and what we're building. And both matter for the durability of our business over the next several years. So a couple of quarters ago, I mentioned our internal tool Honk, which enables our engineers to go on Slack from their phone and ask an AI agent to fix a bug or add a feature. And then they get a testable build back before they even reach the office. That way of working is now ubiquitous and it's unlocking a compounding advantage. So Honk is our coding agent, but there's something new that's called Chirp, which is the engine that we've built underneath it. And you can think of Chirp as something that you use instead of using Claude Code or codings directly that sits in front of it. So Chirp lets our engineers switch models mid-task and route every job to the best available price performance, including open source models that we host ourselves so that we are never locked in. It also shares the context across not just different models and different developers, but across the company. So we don't pay for the same reasoning twice, and we don't lose our own data. And it also shows us our inference spend down to the individual developers. There is plenty of industry debate about AI investment and costs. But our view is that being an AI beneficiary means winning on the cost side, too. We hold a high bar for every investment that we make in this area. And we invest only where it generates real advantage and sets us up well to drive growth and improve margins over time. If something works, we doubled down. If it doesn't work, we eventually move on. Over the last 3 years, we have not increased head count while revenue per employee is on track to double. So as you can see, the operating expense growth is not coming from people. It's coming from compute and marketing. Both of these are variable and entirely in our control. And we will continue to invest in AI on our terms. We're vendor agnostic. We have controls over our usage, and we always undertake these investments relative to the returns that they can support. The inference we give users is also under control -- under our control, which means that the cost curve is also under our control. At Investor Day, we laid out 4 big ideas about where Spotify is heading. One quarter later, we've shipped against all 4. We said the world is moving from recommendation to generation with users in control. Today, Talk to Spotify, Personal Podcast and Studio by Spotify are in users' hands. And in the coming weeks, we'll be rolling out Prompted Playlist for Audiobooks to our best-in-class books experience. And Alex mentioned our Large Taste Model, which is a big investment for us. Let me tell you what it's doing so far. In the first month, since we deployed our new Autoplay recommendation system powered by the Taste Model, active days have increased which is very hard to do at our already high engagement levels. Autoplay minutes and track saves have both grown significantly. And Autoplay drop-off has declined. And in our chat experiences, the Large Taste Model is doing the same, minutes are up double digits, more active days and more saves into libraries and playlists. These are powerful inputs to our customer retention rates and lifetime value and among the most challenging metrics to move for us. Now the industry watch this scaling curve and the scaling laws play out with general LLMs. And when we think about it is that now we are watching it play out with our Taste LLM on a model that no competitor can buy. We said the engagement follows a power law, and we launched our first onetime credit add-ons to serve the head of that demand curve. From DJ to Daylist, we know these investments take time to scale, and they pay off over time. These items are capped by design. Every credit purchase carries a defined amount of inference behind it. So usage, cost and monetization, stay connected. We also said that Spotify is moving from single player to multiplayer. And this quarter, that stopped being a road map and became behavior. Messages is live, and people now react to tracks, reply and share music directly inside Spotify. Listening activity shows you what your friends are playing right now and listening stats is becoming something you share and compare, not just a private report for you. Almost 50 million people are already using Jam every month to listen together in real time. You're no longer alone on Spotify. You're there with your friends, your real-life friends. And we said we would keep optimizing for time well spent and increasing the value of premium. One example that I'm personally very passionate about here is fitness. Last week, we began rolling out Running Mode. You tell Spotify in plain language to build a running playlist for an 8-minute mile or an interval session. It understands not only your taste and the BPM, it serves you your favorite tracks to your exact cadence, mixing them together seamlessly so that you can literally run to the beat. It adds optional audio coaching right in your ear and it stays fresh every week. This is an experience that only Spotify can deliver because of the investments we've made. Looking beyond Running Mode, I'm excited to share that SongDNA has now been used by more than 100 million subscribers, making it one of the fastest adopted -- fastest-adopted features that we've ever shipped. Finally, our music remix capability. We're excited about the product experience and what it will unlock between artists and fans. Our model is one where artists choose which ones they want to make available for remixing with consent, credit and compensation to destined in from the start. That model is winning over the industry. Following our agreement with UMG in May. Today, we're announcing a deal with Merlin, the digital licensing partner for the world's leading independent labels and distributors. The agreement gives artists across 30,000 labels in Merlin's network, the opportunity to participate and make their catalogs available for covers and remixes. The enthusiasm from the independent community has been striking. And what we -- and we hear that same support across the wider market. Deals like these take time, but we built this so the virtually every rights holder who wants can join in. Big picture, there is more work to do before launch, and it will take time to scale into a material revenue driver. But we are very excited about the potential for Spotify for Artists. So if there's one theme I would leave you with today, it is this. Investor Day described where we believe Spotify is going in the future. And this quarter demonstrated that we are already building that future, better engineering, faster shipping, new products and new ways for users to engage. We're still in the very early stages of what is possible and we'll continue to have a high bar for investments. Our margin is a managed outcome, not a byproduct. Our job remains the same: understand the technology early and deeply and turn it into something that people love, creating value for our stakeholders. Now Christian will take you through the numbers. Christian Luiga: Thank you, Gustav, and thanks, everyone, for joining us. I will cover the quarter 2 results and then provide some perspective on our outlook. Unless otherwise noted, as always, our reference growth metrics are presented on a year-over-year constant currency basis. We're pleased with how the business performed in the quarter. MAU continued to grow healthy at 12% year-over-year with notable outperformance in Europe and North America. Our net additions of 16 million were 1 million below forecast. We added 7 million net subscribers during the quarter, growing quarter-on-quarter across all regions with notable outperformance in Rest of the World and North America. We finished at 300 million, 1 million ahead of our guidance. Total revenue was EUR 4.8 billion, growing 15% year-over-year, which was an acceleration of the 14% we delivered in quarter 1. Premium revenue rose approximately 16% year-over-year versus 15% last quarter, driven by subscriber growth of 9% and ARPU expansion of 7.4% year-over-year. Our Ad-supported revenue grew 3% year-over-year, which is consistent with quarter 1. Our automated sales channel continued to grow fast and represented nearly 40% of our ad-supported revenue in quarter 2, up from just over 30% in quarter 1. This strength was largely offset by expected declines in our direct sales channel. Importantly, our price optimization work is now complete, and this channel is stabilizing. We have also completed the migration of our ad inventory to our in-house ad server, allowing us to further streamline our sales process and capture more demand. With respect to our outlook, nothing has changed. We continue to expect our ads business to inflect towards double-digit growth in the second half of 2026. Gross margin came in at 33.4%, surpassing guidance by 30 basis points, the year-over-year expansion of 193 basis points. Favorability versus our guidance was driven by primarily quarterly timing shifts related to our growth investments. We also saw a small onetime benefit from cancellation of the Digital Service Tax in Canada, where we reversed an accrual from previous years. Operating income of EUR 655 million was EUR 25 million above our guidance of EUR 630 million, delivering on operating margin of 13.7%. Social charges contributed to EUR 9 million of outperformance, and that was against our forecast, of course, and due to share price movements in the quarter. Excluding the non-forecasted social charges favorability, we came in at EUR 16 million above guidance, driven by the gross margin outperformance. Finally, free cash flow was EUR 797 million in the quarter, up 14% year-over-year. The quarter was slightly lower relative to quarter 1, partly as a result of timing of cash tax payments. Our first half working capital benefited from remain -- benefit remained consistent with the prior year. On capital allocation, we have repurchased $662 million in shares year-to-date through August 3, representing 30% increase over 2025 levels. In aggregate. We have bought back nearly 2.2 million shares since we resumed repurchasing activities in 2025 or approximately 1% of shares outstanding. Given the stronger cash flow in the years ahead, even with M&A, we expect that we will also return cash to shareholders. As of close of the quarter, we had EUR 9.4 billion in cash and cash equivalents and no debt other than lease liabilities. Looking ahead to quarter 3, we are forecasting MAU of 788 million, an increase of 11 million from quarter 2. As Alex discussed earlier in more detail, this guidance includes product optimization activities in emerging markets, while growth rates in developed markets remain stable. On subscribers, we are forecasting 305 million for quarter 3 or net additions of 5 million. We continue to see the business as well positioned to drive another full year healthy MAU and subscriber growth. We're also forecasting total revenue of approximately EUR 5 billion in quarter 3 or 14% growth. This reflects an ARPU increase consistent with quarter 2 and improved growth in our advertising business that I mentioned earlier. We anticipate a quarter 3 gross margin of 32.9%, approximately 130 basis points above the prior year. Our gross margin outlook incorporates continued strengthening in our core business, reinvestment into new products and the typical charge we take in the third quarter to account for our annual exposure to regulatory fees in one of our markets. Moving to operating income. We're guiding to EUR 670 million in quarter 3. This reflects the above, along with a temporarily elevated operating expense in quarter 2 and quarter 3. We continue to expect these marketing and AI-related investments to drive approximately EUR 200 million in incremental operating expense for the full year. Quarter 4 is well positioned to see a moderation in the rate of year-over-year operating expense growth as we move past the heavy concentration of this year's marketing activities and calibrate on the other costs. In 2026, we continue to be flat on the number of employees. So this year's investment cycle is not driven by structural expense additions. It's marketing and AI related, both are investments that are entirely in our control. As we stated at our recent Investor Day, we remain focused on striking a clear balance between LTV-enhancing investments and sustainable margin expansion. Although we do not provide full year guidance for gross margin and operating margin, we continue to expect both to improve in 2026 on a full year basis. As we have said, the quarterly progression of our margins is variable and dependent on the timing of investments. As you've seen from us historically, the rollout of new features and products can temporarily moderate margin expansion while setting the business up well for future monetization potential. We continue to expect meaningful year-over-year growth in free cash flow in 2026. So in conclusion, we had a solid quarter 2. We remain well positioned to continue compounding growth, profitability and free cash flow. And with that, I hand it back to you, Bryan, and Q&A. Bryan Goldberg: Great. Thank you, Christian. Again, if you've got any questions, please go to Slido.com, #SpotifyEarningsQ226. We'll be reading the questions in the order they appear in the queue with respect to how people vote up their preference for questions. And our first question today is going to come from Jessica Reif Ehrlich on the product road map. You have a unique global platform for both audio and video products. You provided a robust product road map in May at your analyst event. What products are you most excited about in the near term? And where do you think you will get most traction over the next 3 to 5 years? Gustav Söderström: So thanks for the question, Jessica. This is Gustav. I'll start and then maybe Alex wants to jump in because I know he's also very excited about product. This is kind of like asking me to choose between my children. So it's a tough question, but I'll try. But first, I kind of want to level a little bit because what I am most excited about is the system that we've built and what we presented at Investor Day. So the way to think about it is some time ago, over a year ago, Alex spoke and we realized that the world that we were in where software development was mostly an amortization game, right? You developed once and then you amortize your developer investment over more and more users. That world was going to change because inference adds a variable cost per user. So we looked at this and we said the game is going to change. There's going to be more variable cost per user. This could be a headwind or it could be a tailwind. So we decided to start working on changing the model with this power law that Alex and I talked about were some users use the product a lot more than others, which didn't really matter so much in the amortization world because it didn't have a large variable cost, but it will matter a lot in this new world. We decided to change the model. So we've built this platform where we can decide how much inference we want to put into the free tier, how much we want to put into the premium tier. And then instead of saying that's where the party ends, you have to go somewhere else. We say to people, if you want to live in the future, you can. You just pay more. So we let some people who are prepared to pay for it run ahead of other users. And we demonstrated this model with Audiobooks, which works exactly like this. We give about 15 hours of Audiobooks in the premium tier. Some people want much, much more than that. They're allowed to run ahead of everyone else and pay for it. So we spent a lot of time building that infrastructure. And as we don't like to ship ideas, we didn't really talk about it until Investor Day. That's kind of what we revealed this system to be able to have different types of users with different levels of monetization and different needs on the same platform instead of being sort of kept back by the average or what the least engaged user can afford or we can afford to give them. So that is what I'm excited about, having built this platform. Now we're launching a long range of products on top of this. And I can tell you sort of what I'm excited about there and which ones in the near term and longer term. But it's important to think about the structure. I'm a systems type of guy. That's what really excites me. In terms of actual products, I would say right now, the thing that excites me the most is Reserved. It is probably the feature that the most people ever have said, "This is the best thing you ever did at Spotify". And we've seen, as Alex said in his introductory remark, really exciting numbers there. So I think this is one of the biggest values that we put in premium ever. As we said before, this is actually unique to us because of the structure of these deals. So that's very exciting to me. The second thing I would say, more in terms of AI, which I mentioned in my comments, my prepared remarks, is the LTM. The LTM, we talked a lot about it at Investor Day, pretty big investment for us, both in terms of personnel but also training costs. So it's very good to see it paying off. The bet we made there was that the old type of machine learning had capped out. More data and larger models did not produce better results. The sequence-based LLM follow different laws, the laws that are called scaling laws. Where more compute, more parameters and more data actually produces better results. And now we're seeing those. We're seeing these scaling laws play out on the inside in terms of taste and recommendations. So that's very exciting to me. The third thing that I'm really excited about, which I think Alex mentioned as well is SongDNA, which is a feature that we put a lot of love into. We acquired a company called WhoSampled to power this feature. So we invested something there. We took some costs and now it's paying off with over 1 million users using it and loving it. It's also very unique to us. So that's maybe my third if I would rank them. Another one, which we don't talk so much about, but that I'm personally very excited about is music videos. We invested in music videos and a great music video experience for a very long time. Now we have both a good experience and the catalog. And we are seeing that songs with music videos, specifically new releases are performing much better, which was the bet, meaning that music videos is of outsized important when you're discovering a new artist because you're wondering who the artist is, you want to see them. It's not that important the tenth time you are listening to the song, but it's very important the first time. So that's quite exciting to me. Obviously, I think it's a tie between maybe GenPods and Running. Running just because fitness is so close to my heart. I think we have a very unique experience there, which no one else can really do. There is no other service that can give you a playlist at the cadence you're running in, with your favorite songs and beat match them and mix them together. GenPod excites me because it's a podcast that didn't exist before. It's a podcast about you, both your taste, the new releases that came out in terms of music, the podcast that you missed last week, the books that you should have read or that are coming out. But also if you ask for it, exactly what happened in your neighborhood. There's no podcast about your actual neighborhood, but now there is. So that excites me and what we see the early -- very ,very early signs, I want to say, but the very early signs are exciting. This is something that is new to people. I think those are the ones that are near term and exciting. Longer term, I was also, obviously, I'd be remiss if I didn't say that our remix and covers, I think is an incredibly exciting product, again, because there is no one else that can really do this. Normal generative music will happen with or without us. This product will not happen without us and it needs to exist so that existing artists can participate in this. So that's very exciting to me. It's a lot of work. It's going to take more time, but I'm very excited about what we're seeing internally. Lastly, I would say the longer term, back to systems thinking is really what you can see and talk to Spotify. So if you've been lucky enough to be in the U.S., we started rolling this out and try it, you can literally talk to Spotify now and you get very good answers about the music, about who played in what band, when they're touring, what the song is about. These are better answers than you get from any LLM, certainly within our domains, about podcasts and books and music. So without stretching it too far, I feel like Spotify is coming alive and you can literally start talking to it. It was a long answer, but that's what I'm excited about. Bryan Goldberg: All right. We'll go on to the next question. And another 1 from Jessica Ehrlich on advertising. Advertising growth in the past year has been subdued despite programmatic now comprising over 25% of ad-supported revenue. Can you provide an outlook for the coming year or years? And what can you do to drive momentum in what is a very high-margin business that monetizes your engaged and growing base of users? Alex Norström: Jessica, this is Alex. I'll start. I actually take the opportunity to organize this a little bit differently because I do think that this similar question is coming further down the line from Richard Greenfield. So I'll try to do both at the same time. I'll speak to maybe most to why should investors have confidence in us when it comes to the ad sales business of Spotify and then maybe Christian can talk about the margin side of things. So I want to pull the lens back a little bit and talk about the past 2 years here. I've said many times now that we have been in a transitional phase with ad sales. And in the beginning of this year, we completed that transitioning. We now are entirely on the new ad stack that is proprietary built inside the walls of Spotify. I think 99% of all the impressions that we serve are now on our own ad stack. But the big thing is the addition of the Biddable Exchange that we put in place and the automated sales channels. These are now almost 40% in Q2, up from 30%. And if you ask me, I can tell you that it's even going up further from here. So the 2 things to think about is obviously supply and demand. We'll start with supply. The supply picture has actually never been stronger. It's not only about user growth and reach, which is obvious because we grow and then the reach sort of follows, but it's also about MST+ and the new placements we have in the free tier. It's also about us launching personalized ad load, and it's also about the depth of the engagement that we have. So this, in turn, drives a lot of supply for us to sort of match the demand against. Now on the demand side, for the longest time, it's -- since the inception of Spotify really up until 2 years ago, the way to buy ads on Spotify is the brand would call us, literally call us or contact us via e-mail, and they would buy fixed and guaranteed campaigns from Spotify. Now that's all good, but it's also capping us in several ways. One is it's really capping us in terms of pricing and sell-through. So when the inventory is bought, it's bought. And it's also capping us, obviously, in the ways that people want to buy. Not everyone wants to write e-mails, sign I/Os and make calls. They further wanted to automate the buying as well. So what we have put in place now actually uncaps this, unlocks both of these things. One, the obvious thing is that it's -- a lot of it is self-serve and automated. The other thing is that now people that find our ad inventory valuable can go in and bid up the pricing. So it unlocks really both of these things. And the bottom line is really that this has led to not just existing advertisers moving over to this new way of buying, but it's also that we have increased the active advertisers. We are now at 33,000 active advertisers. This is 60% up from last year, which is great. So it's really the right plan, and we need to just keep working on it. A funny sort of tidbit in this is that we recently launched plug-ins and MCP towards Claude, ChatGPT as well as Gemini and people are now actually prompting to create campaigns and audio assets. I think out of the 33,000 active advertisers, we now have 7,000 of them using our AI audio asset creation tool, which just makes it easier for brands to buy on Spotify. So there's a lot of change going on, but I'll just rinse repeat, there are 3 reasons -- there's something that hasn't changed, and that's the 3 reasons that people come to Spotify to buy ads. It's a beloved brand. It's a high-quality content, and it's a high user engagement. Christian Luiga: So Christian here, just on the margin side to fill in on that. I mean, one of the things you brought up, Alex, is very important to understand. I mean, when we move to an automated sales channel and we also have self-serve, it becomes a scale business different from before. So as we scale and the ad monetization, both from music and podcast, we will also be able to improve our profitability. And as we said at our Investor Day, we believe that we can move from the 20% range we have today towards 40% over time. And music, as we scale in emerging markets, we should see healthy margin flow through on ad sales. So that's what I wanted to add on the margin side. Bryan Goldberg: Okay. Our next question is going to come from Rich Greenfield on music add-ons. Are you surprised more artists have not signed on to the AI music tier to enable you to launch? What is stopping artists from participating? Alex Norström: I'll start and maybe Gustav, you can jump in. We -- following our agreement that we had with UMG and Universal Music Publishing Group in May, we announced today the deal with Merlin, which adds 30,000 labels in Merlin's network, the opportunity to partake into this new product that we're building around covers and remixes. I think it's worth rinse repeating what we said during Investor Day. What we're trying to do is very considerate and planned out. So we're trying to -- we call it the 3 Cs at Spotify. First of all, we are looking for consent. We want artists to be consenting their work into this catalog so people can play around with covers and remixes based on their art. We also obviously want to give them credit. And last but not least, this is about compensation to the labels and publishers and artists and songwriters. We -- not only do we have the consent and give credit, but we also drive the compensation for this. So really, we're talking about the first legal way to partake in this AI tailwind that we see coming for interactive music basically. Gustav Söderström: And I would just say we have really strong momentum there. One thing that I think is important to remember is that while you can see that there is a skepticism around net new artificial music by many people out there, what we're doing is something different and artist see that. Our products are about real artists, not fake artists. And in the case of remix, real artists with real voices, right? So you're listening to real people. That's a very different proposition, which is why we're focusing on this. This is the thing that doesn't exist. and artists remain excited about that and consumers remain excited about that. But it is an ever-changing landscape. I would say what to expect from us is that you should expect to see a research preview coming out of our model where we start to give this to some users. And for that, we do not require, as we said before, a full catalog. Why is this important for us? So this is not a test of the product. It is the thing that guarantees that the product will be very good. So for those of you who know about machine learning, you know that one of the most important phases is the post-training using reinforcement learning. So what we will do is we will allow people who are fans of a certain artist to start making remixes with songs from that artist. And what they do is they say, I think this remix was better than this remix. And then we get the preference data that actually makes the model better. And this is our unique advantage in this business. We have now 777 million people and music fans to do reinforcement learning with, which is why we think we're very well positioned in this business. So that's kind of what you should expect as the next step. We're going to launch the product when it's ready, and we think it's good enough, and it has the right appeal to consumers. Bryan Goldberg: Okay. Our next question is going to come from Justin Patterson on AI tooling. Over the course of 2026, we've seen meaningful momentum in open source. How are you thinking about the costs and benefits of deploying open source more broadly versus how you're using Anthropic, Claude and other models today? Gustav Söderström: Yes, I'll go here as well. Of course, the open source movement is very helpful for us, and we talked about this, the Large Taste model is based on open source. It is using what is called CPT continuous pretraining, where you take a model that was trained an open source model and you continue to train it on your proprietary data. This is what I talked about that is performing really well for us. So the fact that these models come up more often are much better and cheaper at the same time, it's obviously very helpful for the consumer product. But it's also helpful for our development environment and our developer costs, as I said we've built this internal product called Chirp that we will also offer to other companies actually because they're asking for the same thing, where you can seamlessly switch between one of the paid models and a hosted open source model, keeping the context of the project that you are in, right? This is why it's important for us that we control the context of the developments we're doing so that we can always go towards the best price performance. Also, I think you can all see that this is putting pressure on the pricing. And there are lots of announcements of prices coming down per token, which is obviously very helpful for us. But on a constant per feature quality level, it's pretty clear that the costs are coming down for a certain level of quality. That doesn't mean that we won't use more advanced models, but for a certain feature level of quality, the costs are coming down quite fast. Bryan Goldberg: Okay. Our next question is going to come from Batya Levi on MAU. What's informing your guidance for slower MAU growth in the third quarter? Do you see a change in the competitive environment or the general intake for your campaigns? And then if I may, I see Benjamin Black had a question about some initiatives to drive MAU growth in the future as well. So you might want to address that also. Alex Norström: Yes, I will. Thanks, Batya and Benjamin. Just to hijack this for a second, you don't see us here, but Gustav and I are in Stockholm. The sun is shining, and we're happy about the fundamentals of Spotify. It's really in a good place. We just hit 300 million subscribers, and we're super elated to be in this sort of rarefied air, and it just keeps growing. On the question of MAU, so we've had a few years of outperformance in MAU. And maybe more recently, in the maybe past 4 or 5 quarters, we've had outperformance relating specifically to emerging markets. I think we've pointed that out in past earnings calls. And of course, emerging markets includes countries like India and Indonesia and so on. And as a reminder, these are very populous nations. So they're a very lucrative opportunity for us. And what you're seeing us do now is that we're making changes to the product and the value proposition and strategy in these markets. We've made changes like tweaking the sign-up to get higher-quality MAU throughput. We've deprecated a lower-end Android device support, which builds the business and makes it more efficient for us. We've carefully introduced some friction in both ad load and some limitations in our free tier. All of these things are positioning us for more monetization. And Gustav and I have a saying where we say sometimes we pull the growth lever and sometimes we pull the monetization lever. Now here, we're starting to pull the monetization lever. So our belief is that this is going to take some time, but the shape of the growth curve follows other markets. And the way to think about it is really when you start out in a market, you work on getting product market fit and get some MAUs. slowly and surely, that MAU growth will increase. And then all of a sudden, you have a base to convert from. Then you have some subscribers come in, there's some conversion coming. And then as you calibrate the product and value proposition, that growth then continues to become something like a LatAm, which also started out with very low conversion, but massive MAU growth. So our planning here is very considerate. And I think also a consequential point here is that this will not affect subs growth in the near term. Bryan Goldberg: All right. Our next question is from Rich Greenfield on Reserved. You started a meaningful ad campaign for reserve ticketing after Role Model. How many concert tours have you worked with since? And are you starting to see an uptick in conversion to paid tiers to access Reserved? And how do you see Spotify's positioning in the broader live event ecosystem evolving? Alex Norström: That's a good question. Thank you, Richard. I -- whenever I get to talk to users about Reserved, we get so much praise. We get praised, Live Nation gets praised for the partnership with us and the way we're sort of shaping this feature. And just as a reminder, the big idea with Reserved is that the biggest fans get access to tickets. Secondly, artists get to have the biggest fans in the room. And third, Spotify gets to have unique value for our premium subscribers, which obviously gives us differentiation, the way the deals are structured to Gustav's earlier point, but it also increases value to price perception for Spotify. It really is like a triple win. It's still early, to your point on how many tours we've done. It's been a few. It's U.S. only for premium right now. So the rough numbers is that we've had about 100,000 ticks reserved -- tickets reserved. And in some instances, we've blown through the allocation and Live Nation has even upsized them mid-run. Obviously, I'm looking forward to many more tours and more markets. And as far as monetization goes, this is currently about increasing the value to price ratio on premium. Bryan Goldberg: All right. Our next question is going to come from Jason Bazinet on music add-ons. You now have AI music deals with UMG and Merlin. Do you need deals with all the majors before you launch an AI service? Why or why not? Gustav Söderström: So I can start there. So the answer is we do not need a deal with all the majors. We would like to have as many artists as possible, obviously, but we don't expect to have all artists. And if you go back to the beginning of Spotify, Spotify started without significant parts of the catalog. Took many, many years before the big act maybe like Beatles, Metallica were on. So you don't need full catalog -- of course, we want as many as possible because that's better for consumers and for creators. But as I said, what you should expect is that we start improving this product in the public as a research preview so that we can start getting the preference data that automatically improves our model. So that would be the next step. And then we'll decide when we launch based on where we are. There's more to come, but very strong momentum. Bryan Goldberg: All right. Our next question comes from Eric Sheridan on monetization. On the heels of Q2 '26 premium subscriber growth reaching 300 million, how should investors think about the scope for monetization efforts as a result of more interactive tools and live event integrations across the subscriber base? Alex Norström: I'll take that. So you're basically baking in an opportunity and TAM question and also sort of like a pricing question in here and product as well, I guess. And we've said it before, but we're early in our days. I think we've reached this sort of 300 million mark, which is rarefied air. There aren't many other companies that have built one product and have 300 million recurring customers come back again and again every month. So we're now close to 4% of the world's population. We've said before that maybe we'll not reach 90% of the world, but it's not impossible that we'll get to 15% penetration of the world. So our most important line of work here for Gustav and I is actually to drive the value to price ratio upwards. Meaning we need to keep building interactive tools like you talked about, like including covers and remixes, but also some of the more recent ones are like taste profile, personalized podcasts and so on and so on. And Audiobooks is a great example of an add-on Spotify that basically generates more sort of structural ARPU increase than just price increases. And I've spoken to MAU as well. So there's a bit of a differentiated approach depending on if we're talking about developed markets or established -- developing markets or established markets. And so we do think that the opportunity ahead of us is still immense. Bryan Goldberg: Okay. Our next question comes from Justin Patterson on time spent. In 2025, you streamed 211 billion hours of content versus Netflix's 191 billion. As you expanded new formats like fitness and deepen personalization capabilities across the platform, how do you believe time spent can evolve on Spotify? Alex Norström: It's a good question, Justin. So the -- you're pointing to Netflix and sometimes we also get a similar comparison with YouTube. And I think the important comparison and observation to make here is that we're very different from these other streamers. When it comes to engagement, our engagement typically spans many more devices than our friends here in the industry, whereas most of them are big screen and maybe small screen. We are speakers, we're gaming consoles, we are cars, we are context like sleep, we are context like studying, where you actually find Spotify actually much more compatible. So you have sort of the context universe spread out over our billions of hours. And I think it's worth pointing out also that the one metric that we pay especially -- put special value on when it comes to engagement is the active days. And we've talked about before that we have over 100 million of our subscribers spending more than 20 days in a month with us. And so the reason why we're tracking this number, the active days is that we find it to correlate very well with lifetime value, which is great for us, right? So we've seen that increase again and again. And even this quarter, active days in a month has increased overall for premium subscribers on Spotify. Bryan Goldberg: All right. Our next question is from Deepak Mathivanan on AI products. You've launched several AI-powered products in the last 6 months, including Prompted Playlists. Can you discuss what types of benefits you're seeing in the KPIs such as listening hours, conversion rates or churn? Gustav Söderström: Sure. Thanks, Deepak. So I think in general, some metrics is that AI-powered experiences now reach about 1/4 of our active users. And this year's launches, Talk to Spotify, Studio, Personal Podcast, Prompted Playlists are scaling really fast. So it's already reached more than 25% adoption among active users. So we have scale and a healthy compounding business and opportunities that we're then uniquely positioned to pursue. So we feel very good about the overall adoption. Prompted Playlist specifically, I think it has reached already 14 million of the 100 million actives. So that's pretty quick adoption for a feature like this. And in terms of what we're seeing, I shared a bunch of metrics in the prepared remarks here around the Large Taste Model, where we are moving some of the metrics that are absolutely the hardest to move, which are active days. And sort of related to the previous question of viewing hours and engagement, as Alex has said before and I, we focus on active days as the most important metric to try to drive rather than only engagement in the moment. And so we are seeing those effects from this. And I think overall, since 2010 when we started investing in personalization, the correlation between personalization and retention has been super clear for us. Bryan Goldberg: Okay. Our next question comes from Doug Anmuth on third quarter operating expenses. Can you talk about the drivers of the implied acceleration in operating expenses in Q3? Christian Luiga: Thank you, Doug. Yes, I just wanted to -- I understand it could be a little bit confusion here on our expense for this year. We have said we're going to elevate it with EUR 200 million for this year. something that is very much in control and structural. And just to give a little bit better guidance on it, excluding the currency and social charges we see on our expenses, our expense growth in quarter 3, we expect it to be roughly consistent with quarter 2. So it's going to be pretty much the same growth. So I think it's important to be careful with the rounding nature of our guidance. We talk about EUR 5 billion. We also add, I mean, growth, 14% growth and ARPU consistency between the quarters. So we're well positioned to actually moderate this into quarter 4 and to keep it consistent into quarter 3. And this is a structural -- nonstructural cost change, personnel at in the same level. We do this investment to increase engagement and LTV and marketing. We have a lot of new features coming out, and we are also boosting a bit on our AI, and we talked about that at Investor Day. So nothing strange, nothing new, and we are keeping this consistent with what we have been thinking all along from the beginning of the year, and we are in full control. So excluding currency and social charges, we see our expense growth to be roughly consistent in quarter 3 with quarter 2 growth. Gustav Söderström: And I would just chime in here. I said this in my prepared remarks, but we started this year by investing to make sure that we were leading in this wave of using AI. And we are leading according to other companies actually. Now we're starting to focus on cost and efficiency, which is always the second step. This is what I talked about when we talked about Chirp, where we have control over our spend, we can choose models, et cetera. So we are sticking to our cost moderating in Q4. It's also important to just remind all of you that these costs are compute and marketing. They are within our control. These are not long-term CapEx investments that need years to roll back. Bryan Goldberg: All right. We are coming up on the hour, so we've got time for a few more questions, and we've got a follow-up from Doug Anmuth on product tiers and ARPU. Can you help us understand the timing of add-on tier rollouts across verticals? And how should we think about their impact on premium ARPU in the second half of this year and into 2027? Alex Norström: Doug, Alex here. We don't comment on timing for launches and -- we don't give guidance on ARPU either. But I can comment on this in a different way. You heard Gustav talk and wax passionately about the different products that we've been rolling out and how the sort of usage-driven paradigm is one important paradigm for us and how we convert from free to premium from premium to add-ons. The one example I want to share is that Audiobooks +, which was launched a while ago, since we last shared a number on that, that has now doubled, which is great. So -- and it just keeps growing, and this is just in a select few markets. So obviously, that introduces another type of change to ARPU. ARPU obviously can change by way of price increases. But when we have success with an add-on like this, it will structurally increase ARPU in a different way. So in the sort of like price to quantity equation, we're really providing a different type of price increase here than just sort of moving the price of premium upwards. Bryan Goldberg: Okay. And our next question is going to come from Jason Helfstein on the pricing environment. Is there any read-through from the Apple Music price increase that was announced in July? And how does this impact your thinking about price increases going forward? Alex Norström: We don't comment on other companies' price increases. But what it does show is that this is an example of just continued value in music streaming services, and we're happy about that for the ecosystem. Our category leadership in not just user scale and subscriber scale, but also our leadership in engagement keeps on being our focus. And of course, the more value we deliver, the more pricing power we will have. And as of right now, we're happy to be the price leader in our category. Bryan Goldberg: Okay. And our last question is going to come from Jason Bazinet on the subscriber opportunity. You had solid premium net adds this quarter, but the record labels suggested the industry's premium growth slowed in the second quarter. How confident are you in the long-term growth of premium subscribers for the industry and Spotify? Alex Norström: I'm very confident. We don't give guidance for long term, but what we're optimizing for is a healthy funnel. This not only builds our business, Jason, it's, of course, aimed at helping our subscriber growth and not slowing it down. So very confident about the long-term growth. Bryan Goldberg: All right. Great. So that concludes our Q&A session. Thank you, everyone, for the questions. And it also concludes today's call. A replay of the call will be available on our website and also on the Spotify app under Spotify Earnings Call Replays. And thanks again, everyone, for joining. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect. Before you buy stock in Spotify Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Spotify Technology wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* That performance is why people listen. 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Spotify (SPOT) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Spotify Technology? Here are five stocks we like better. Spotify delivered strong second-quarter growth: Constant-currency revenue rose 15% year over year to EUR 4.8 billion, gross margin reached a record 33.4%, operating income exceeded guidance at EUR 655 million, and free cash flow increased 14% to EUR 797 million. Premium subscribers surpassed 300 million after Spotify added 7 million during the quarter, while monthly active users reached 777 million. The company forecast 305 million subscribers, EUR 5 billion in revenue and EUR 670 million in operating income for the third quarter. Spotify is prioritizing monetization and product expansion: It is refining free-service offerings in emerging markets, scaling automated advertising and its proprietary ad stack, and investing in AI features, audiobooks, ticketing and artist-approved remix tools to drive engagement and long-term average revenue per user. MarketBeat Week in Review – 06/08 - 06/12 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. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Spotify's "North Star" Outlook Was Music to Investors Ears “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. 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. → No Hangover: Revisiting Microsoft One Week After Earnings Peloton Stock Gives Back Gains After Upbeat Earnings Report 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. → MarketBeat Week in Review – 08/03 - 08/07 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. 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. 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. 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. 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. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Spotify Technology Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Spotify Technology S.A. SPOT reported second-quarter 2026 earnings of $3.03 per share, missing the Zacks Consensus Estimate of $3.27 by 7.3%. The company had incurred a loss in the year-ago quarter. Higher marketing, cloud and artificial intelligence spending weighed on the bottom line. Revenues of $5.55 billion increased 14% year over year on a reported basis and 15% at constant currency. The figure beat the consensus estimate by a slight margin. Premium subscribers reached 300 million, exceeding management’s guidance by 1 million. Spotify Technology price-consensus-eps-surprise-chart | Spotify Technology Quote Monthly active users, or MAUs, increased 12% year over year and 2% sequentially to 777 million. Spotify added 16 million MAUs during the quarter, one million below its guidance. Growth was recorded across all regions, with notable strength in Europe and North America. Premium subscribers rose 9% year over year and 2% from the prior quarter. Net additions totaled 7 million, exceeding the company’s forecast by one million. Ad-supported MAUs advanced 14% year over year to 494 million, reflecting continued expansion of Spotify’s global audience. Premium revenues increased 15% year over year to €4.33 billion. On a constant-currency basis, revenues grew 16%, supported by subscriber gains and higher pricing. Premium average revenue per user increased 7% to €4.89, or 7.4% excluding currency effects. The benefits of price increases were partly offset by product and geographic mix. Management also highlighted improving engagement, with active days among global subscribers increasing. The company continues to add value through services such as Reserved concert-ticket access, personalized podcasts and additional audiobook offerings. Gross profit increased 21% year over year to €1.60 billion. Gross margin expanded 193 basis points to a record 33.4%, topping management’s forecast of 33.1%. Premium gross margin reached 34.9%, helped by revenue growth outpacing music costs, net of marketplace programs, audiobook expenses and video-podcast costs. Operating expenses increased 3% to €941 million. Excluding currency movements and social charges, expenses rose 19%, mainly because of temporary investments in marketing, cloud infrastructure and AI initiatives. Operating income climbed 61% to €655 million, while operating margin expanded to 13.7% from 9.7%. Ad-supported revenues increased 1% year over year to €446 million, or 3% at constant currency. Growth in music-advertising impressions was partially offset by softer pricing. Podcast advertising benefited from sponsorship gains across Spotify’s owned and licensed portfolio. Automated sales channels represented nearly 40% of ad-supported revenues, up from slightly more than 30% in the first quarter. Active advertisers increased 60% year over year. Management completed its price-optimization work and migrated ad inventory to an in-house ad server, supporting its expectation for double-digit advertising growth in the second half of 2026. Free cash flow increased 14% year over year to €797 million, marking a record second-quarter performance. The improvement reflected higher net income adjusted for noncash items, partly offset by working-capital movements. Trailing 12-month free cash flow reached €3.3 billion. Spotify ended the quarter with €9.4 billion in cash, restricted cash and short-term investments. The company repurchased $662 million of shares through Aug. 3, 30% more than during the comparable 2025 period. It has bought back nearly 2.2 million shares since resuming repurchases in 2025. For the third quarter of 2026, Spotify expects MAUs of 788 million, implying 11 million sequential additions. The outlook incorporates product optimization in emerging markets that is intended to improve free-to-paid conversion. Premium subscribers are projected to reach 305 million, representing 5 million net additions. Revenues are forecast at approximately €5 billion, indicating 14% year-over-year growth. Spotify expects gross margin of 32.9% and operating income of €670 million. Management continues to anticipate about €200 million of incremental marketing and AI-related operating expenses in 2026, while expecting full-year gross and operating margins to improve. SPOT currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Trane Technologies TT reported impressive second-quarter 2026 results. TT’s adjusted earnings of $4.31 per share outpaced the consensus mark by 0.9% and rose 11.1% from the year-ago quarter’s actual. TT’s total revenues of $6.35 billion surpassed the consensus mark by 2.9% and increased 6.4% year over year. Rollins ROL posted unimpressive second-quarter 2026 results. ROL’s adjusted earnings of 32 cents per share missed the Zacks Consensus Estimate by 5.9% but rose 6.7% year over year. Total revenues of $1.08 billion fell short of the consensus estimate by 1.7% but increased 7.9% from the year-ago quarter. Verisk VRSK reported second-quarter 2026 diluted adjusted earnings of $1.98 per share, beating the Zacks Consensus Estimate of $1.94 by 2.1%. The figure increased 5.3% from the year-ago quarter. Revenues of $806.3 million topped the consensus mark of $802.4 million by 0.5% and rose 4.3% year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Spotify Technology (SPOT) : Free Stock Analysis Report Rollins, Inc. (ROL) : Free Stock Analysis Report Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report Trane Technologies plc (TT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). 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Spotify Technology S.A. SPOT used its second-quarter 2026 earnings call to shift investor attention from raw user growth toward monetization, add-on products and disciplined artificial intelligence spending. Reported earnings of $3.03 per share missed the Zacks Consensus Estimate of $3.27. Revenues of $5.55 billion surpassed the consensus mark by 0.01%. Spotify Technology price-consensus-eps-surprise-chart | Spotify Technology Quote Co-CEO Alex Norström said Spotify is adjusting product design, ad load and free-tier limits in selected emerging markets. The goal is to improve user quality, conversion and revenue rather than maximize monthly active user additions. Those changes will reduce near-term MAU growth, but Norström said they should not weaken subscriber growth. Management described the move as shifting from growth toward monetization after several quarters of emerging-market MAU outperformance. Spotify ended the second quarter with 777 million MAUs, up 12% year over year but 1 million below guidance. Premium subscribers reached 300 million, 1 million above guidance, after 7 million quarterly net additions. Co-CEO Norström highlighted products that raise Premium’s value and create revenue beyond standard pricing. Audiobooks+ has surpassed $100 million in annual recurring revenue, while Reserved has facilitated nearly 100,000 concert-ticket reservations since its U.S. launch. Co-CEO Gustav Söderström said Spotify designed its platform to match usage, inference costs and monetization. Highly engaged listeners can purchase credits or add-ons instead of leaving the company to absorb unlimited AI costs. AI-powered experiences reach about one-quarter of active users. Prompted Playlist has attracted roughly 14 million users among the first 100 million receiving it, while the Large Taste Model has improved active days, saves and listening behavior. Norström said automated channels generated nearly 40% of ad-supported revenues, up from just over 30% in the first quarter. Active advertisers increased 60% year over year to 33,000 as Spotify expanded self-service and biddable buying. Management said the migration to Spotify’s proprietary ad server is complete and pricing optimization in direct sales has finished. CFO Christian Luiga maintained the expectation that advertising growth will reach double digits during the second half of 2026. Ad-supported revenues grew 3% at constant currency. Luiga said greater automation should improve profitability, supporting the longer-term objective of moving advertising margins from around 20% toward 40%. Söderström said Spotify’s AI investment is concentrated in compute rather than headcount. The workforce has remained broadly flat, while revenue per employee is on track to double over three years. The company expects about €200 million of incremental 2026 operating expense tied to marketing and AI. Management stressed that these costs are variable and should moderate in the fourth quarter. Second-quarter gross margin reached a record 33.4%, while operating income of €655 million exceeded guidance by €25 million. Free cash flow was €797 million, bringing trailing-12-month free cash flow to €3.3 billion. Spotify expects third-quarter MAUs of 788 million, implying 11 million net additions, and Premium subscribers of 305 million, implying 5 million additions. The MAU forecast incorporates the emerging-market changes. Revenues are expected at about €5 billion, with foreign exchange providing an estimated 200-basis-point year-over-year growth tailwind. Management guided gross margin to 32.9% and operating income to €670 million. Luiga said quarterly margins will vary with investment timing, but Spotify still expects full-year gross margin and operating margin to improve in 2026. Management’s central message was that Spotify’s scale supports a wider monetization model built around Premium differentiation, add-ons, advertising automation and AI-driven engagement. The company is accepting slower near-term MAU additions in selected markets while protecting subscriber growth, controlling investment intensity and managing continued margin expansion. SPOT carries a Zacks Rank #3 (Hold). Its Growth Score of A, Momentum Score of B and VGM Score of B provide favorable growth, trading and blended-style signals, while the Value Score of D points to weaker valuation characteristics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Style Scores complement the Zacks Rank, with A or B scores carrying the strongest significance alongside Zacks Rank #1 or 2 (Buy) stocks. The current Zacks Rank can change as earnings estimates are revised following the latest results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Spotify Technology (SPOT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Tuesday, August 4th, 2026Another busy day with pre-market futures way up this morning — it’s days like these where you pat yourself on the back for not having taken all of August off. Following triple-digit gains on the major indexes yesterday, we’re up another +559 points on the Dow, +221 on the Nasdaq and +6 on the S&P 500. Spot oil prices dial back further — $77 per barrel (/bbl) on WTI and $81/bbl on Brent crude — on renewed hope that a deal between the U.S. and Iran to reopen the Strait of Hormuz. Investors do not afford themselves any “Lucy and the football” cynicism; one of these days, a peace agreement might actually stick — and everyone betting this way will have a big head start. Bond yields cooled a couple basis points from a day ago: +4.66% on the 10-year, +4.21% on the 2-year. The U.S. Trade Balance for June came in at a deficit of -$73.3 billion, slightly worse than the -$72.9 billion projected, but a nice improvement month over month — -$77.6 billion reported for May, and well off the all-time low -$133 billion back in March of 2025. Both Imports and Exports lightened their loads compared to the prior month. Caterpillar CAT shares are up +11.3% at this hour, giving a big boost to the blue-chip Dow index. Earnings of $8.17 per share amounted to a +30.72% earnings beat, as the company continues to benefit from the physical data center buildout trend. The stock is still a ways from the late-June all-time highs above $1000 per share, but a strong showing this morning, nevertheless.McDonald’s MCD outperformed bottom-line estimates in its Q2 this morning by 6 cents to $3.38 per share. Revenues came in slightly below expectations, however, with overall same-store sales coming in-line overall, with some weakness in U.S. sales. Shares are up slightly, but still down double-digits, year to date.BP’s BP Q2 showed a solid bottom-line beat, with earnings of $2.22 per share versus $1.98 forecast, for a +12% earnings surprise. The oil & gas supermajor plans to sell off its North Sea business, and shares are selling off a bit: -1.4% at this hour, but still up more than +25% year to date.Archer Daniels Midland ADM added to its strong 2026 performance with a +29.6% earnings beat: $1.84 per share versus $1.42 in the Zacks consensus. Revenues came in a tad light, but biofuels showed promise. Shares are up +2.6% this morning, adding to its +35% gains year to date.On the other side, Spotify SPOT disappointed with a -7.34% earnings surprise this morning — $3.03 per share versus $3.27 projected — and shares are down -6.2% in early market trading. This takes down the stock further from its -16% losses since the start of the year.After the closing bell this afternoon, we expect earnings results from chip giant AMD AMD, biopharma major Amgen AMGN and travel platform Booking.com BKNG, among many others. We continue with the busiest week of Q2 earnings season even as many of the marquee names have already reported. The first of the “Jobs Week” data hits the tape after the opening bell today, with the Job Openings and Labor Turnover Survey (JOLTS) for June. Estimates have rolled back slightly to 7.4 million from 7.6 million job openings reported a month ago. Job Quits remain subdued, keeping with the “low hire/low fire” labor market.Factory Orders for June are expected to come in positive again, to +0.3%, after posting a negative -1.3% for May, which was the first down month of 2026. A big drop in non-defense aircraft orders skewed the numbers a bit a month ago. That said, if the headline number disappoints and comes in negative again, it will be the first time we’ve seen back-to-back negative prints since last summer.Questions or comments about this article and/or author? Click here>> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report BP p.l.c. (BP) : Free Stock Analysis Report Caterpillar Inc. (CAT) : Free Stock Analysis Report Amgen Inc. (AMGN) : Free Stock Analysis Report McDonald's Corporation (MCD) : Free Stock Analysis Report Archer Daniels Midland Company (ADM) : Free Stock Analysis Report Booking Holdings Inc. (BKNG) : Free Stock Analysis Report Spotify Technology (SPOT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved a milestone of 300 million subscribers, emphasizing that Spotify's scale allows for cost-efficient innovation and investment in a superior product that competitors cannot easily replicate. Attributed strong performance to deeper user engagement, with active days increasing globally despite already high levels of interaction. Implemented a strategic shift in emerging markets by increasing friction in the free tier and optimizing ad load to drive higher user conversion and long-term revenue growth. Transitioned the advertising business to a proprietary ad stack, with automated channels now representing nearly 40% of ad-supported revenue, up from 30% in the previous quarter. Launched 'Reserved' ticketing in partnership with Live Nation, creating a 'triple win' that provides unique value to subscribers, dedicated audiences for artists, and increased pricing power for Spotify. Deployed the 'Large Taste Model' (LTM), an AI investment that utilizes scaling laws to improve recommendations, resulting in increased active days and lower autoplay drop-off rates. Maintained strict operational discipline, keeping headcount flat for three years while on track to double revenue per employee through AI-driven engineering efficiencies. Expects the advertising business to inflect toward double-digit growth in the second half of 2026 as the new automated sales channels and in-house ad server stabilize. Anticipates Q3 MAU growth of 11 million, a figure that accounts for intentional product optimization and friction in emerging markets while developed market growth remains stable. Projects a moderation in operating expense growth in Q4 2026 as the company moves past heavy marketing and AI investment cycles concentrated in the middle of the year. Plans to roll out 'Prompted Playlists' for Audiobooks and continue the expansion of 'Running Mode' to deepen the value proposition of the Premium tier. Developing a 'research preview' for music remixing and covers, focusing on a model of consent, credit, and compensation to legally integrate generative AI into the artist-fan relationship. Gross margin reached a record 33.4%, aided by a small one-time benefit from the reversal of a Digital Service Tax accrual in Canada. Audiobooks+ add-on has surpassed $100 million in annual recurring revenue, demonstrating the success of 'subscriptions on top of subscriptions' for high-engagement users. Returned capital to shareholders by repurchasing $662 million in shares year-to-date, representing a 30% increase over 2025 buyback levels. Announced a new licensing agreement with Merlin, giving 30,000 independent labels the opportunity to participate in upcoming remix and cover features. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that the transition to an automated, biddable exchange allows advertisers to bid up pricing and removes the 'cap' of manual direct sales. The number of active advertisers grew 60% year-over-year to 33,000, supported by new AI tools that simplify audio asset creation for brands. Introduced 'Chirp,' an internal engine that routes tasks to the best price-performance models, including open-source models, to avoid vendor lock-in. Stated that while AI investment is currently elevated, the cost per feature is declining as models become more efficient and pricing per token drops. Clarified that the slowdown is a deliberate choice to 'pull the monetization lever' in populous emerging markets like India and Indonesia. Confirmed that introducing friction in the free tier to improve quality and conversion is not expected to negatively impact subscriber growth in the near term. Reported that nearly 100,000 tickets have been reserved through the platform since June, with some allocations selling out mid-run. Emphasized that 'Reserved' is currently focused on increasing the value-to-price ratio of Premium rather than direct ticket fee monetization.

Morgan Stanley raised the price target on Spotify to $640 from $610 and maintained an ‘Overweight’ rating on the shares. Analysts expect the company to post earnings per share of €2.75 ($3.17) on revenue of €4.79 billion ($5.5 billion) for the second quarter. On Stocktwits, retail chatter around the stock surged 850% over 24 hours as investors actively discussed the expected outcome of the earnings results. Shares of Spotify Technology S.A. (SPOT) edged 0.55% higher in the premarket session on Tuesday ahead of the company’s second-quarter (Q2) results. On Monday, Morgan Stanley raised the price target on Spotify to $640 from $610 and maintained an ‘Overweight’ rating on the shares. The updated target implies an upside of more than 25% from its last close. See what 10M+ investors are talking about. Get the Stocktwits Daily Rip for what retail is watching right now, free to your inbox Meanwhile, retail chatter around the stock surged 850% over 24 hours as investors actively discussed the expected earnings results. According to TheFly, Morgan Stanley said that it sees the shares being down year-to-date ahead of the company’s likely new product in the coming months, including new AI features, presenting “an attractive opportunity.” Spotify has recently expanded its AI offerings with a ChatGPT-like conversational music assistant for Premium users, while also providing features like AI-powered playlist creation, transparency labels for AI-generated content, and a planned licensed AI remix and cover features. The analyst also said that Spotify's path to sales growth reacceleration and margin expansion would drive the stock higher. Analysts expect the company to post earnings per share of €2.75 ($3.17) on revenue of €4.79 billion ($5.5 billion) for the latest quarter. This compares to a loss per share of €0.42 on revenue of €4.19 billion in the previous quarter, implying an increase of about 14% in revenue and a shift to profitability compared to the previous year’s quarter. Markets are likely to key in on whether Spotify can moderate operating expense growth following its recent AI investments while maintaining strong monetization trends. Premium tier adoption, early traction for higher-priced subscription offerings, and any cues about the company's expanding suite of AI features and their impact on upgrades or advertising revenue are likely to be major highlights. On Stocktwits, retail sentiment around SPOT stock was ‘extremely bullish’ at the time of writing. One user said, “$SPOT why do I feel like this will pump in the morning.” Another user said, “$SPOT bullish for er tmrw.” A third user noted, “$SPOT will never sell.. this will do a mean reversion to $680.. and the bears will help in how fast we get there.” SPOT stock is down more than 15% in 2026. For updates and corrections, email newsroom[at]stocktwits[dot]com. Aashika Suresh has no position in any of the stocks mentioned in this article. StockTwits' news team content is for informational purposes only and is not intended as investment advice. For more, see our editorial policy. This article was originally published on StockTwits. Related: Anthropic's Google Chip Procurement Could Lead To Another $36B Debt Financing Round FSLR, ENPH, ARRY, SEDG Stocks Rally – Trump Administration Reportedly Considers Tariffs, Price Floor For Solar Panel Raw Material EXPD Q2 2026 Earnings Summary

This article first appeared on GuruFocus. Revenue: Total revenue reached EUR4.8 billion, growing 15% year over year on a constant currency basis, accelerating from 14% in Q1. Premium Revenue: Rose approximately 16% year over year, driven by subscriber growth of 9% and ARPU expansion of 7.4%. Ad-Supported Revenue: Grew 3% year over year, consistent with Q1, with automated sales channels representing nearly 40% of ad-supported revenue. Gross Margin: Hit a record 33.4%, surpassing guidance by 30 basis points and expanding 193 basis points year over year. Operating Income: EUR655 million, EUR25 million above guidance, delivering an operating margin of 13.7%. Free Cash Flow: EUR797 million in the quarter, up 14% year over year. Subscribers: Added 7 million net subscribers, finishing at 300 million, 1 million ahead of guidance. Monthly Active Users (MAU): Grew 12% year over year to 777 million, with net additions of 16 million. Share Repurchases: Repurchased $662 million in shares year-to-date through August 3, a 30% increase over 2025 levels. Cash Position: EUR9.4 billion in cash and cash equivalents with no debt other than lease liabilities. Warning! GuruFocus has detected 3 Warning Sign with BOM:533573. Is SPOT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Revenue grew 15% year-over-year on a constant currency basis, accelerating from 14% in Q1, with record gross margin of 33.4%. Subscriber growth beat guidance, crossing 300 million premium subscribers for the first time, with net additions of 7 million in Q2. Advertising business is gaining momentum, with automated channels now representing nearly 40% of ad-supported revenue and active advertisers up 60% year-over-year. New AI-driven features like Prompted Playlists and the large taste model are driving engagement, with active days increasing and early retention improvements. Reserved ticketing partnership with Live Nation has been successful, with nearly 100,000 tickets reserved and strong sell-through, enhancing premium value. Audiobooks+ add-on has surpassed $100 million in annual recurring revenue, and Audiobooks penetration among premium listeners has more than doubled this year. Free cash flow strengthened to EUR797 million in Q2, up 14% year-over-year, with a strong balance sheet and ongoing share repurchases. MAU net additions of 16 million were 1 million below forecast, and Q3 guidance implies slower MAU growth due to deliberate friction in emerging markets. Ad-supported revenue growth remained subdued at 3% year-over-year, with declines in the direct sales channel partially offsetting gains from automation. Q3 gross margin guidance of 32.9% is lower than Q2's 33.4%, reflecting reinvestments and regulatory fees. Operating expenses are elevated in Q2 and Q3 due to marketing and AI-related investments, with EUR200 million in incremental costs expected for the full year. The AI music remix product is still in early stages, requiring more deals and a research preview before launch, with no clear timeline for material revenue contribution. The company is intentionally adding friction to the free tier in emerging markets, which could temporarily dampen user growth and engagement. ARPU growth is expected to moderate in Q3, with no explicit guidance on future price increases or add-on monetization timing. Q: What's informing your guidance for slower MAU growth in the third quarter? Do you see a change in the competitive environment or the general intake for your campaigns? A: Co-CEO Alex Norstrom explained that the slower MAU guidance is a deliberate strategic choice, not a competitive issue. The company is introducing friction into its free service in select emerging markets (like India and Indonesia) by tweaking sign-ups, deprecating older device support, and adjusting ad load. This "monetization lever" is designed to drive higher-quality users and improve conversion to paid tiers, which will temporarily impact MAU growth but is not expected to affect subscriber growth in the near term. Q: You now have AI music deals with UMG and Merlin. Do you need deals with all the majors before you launch an AI service? Why or why not? A: Co-CEO Gustav Soderstrom stated that Spotify does not need deals with all the majors to launch. While they want as many artists as possible, they don't expect to have everyone, drawing a parallel to Spotify's early days when major acts like the Beatles were absent. The next step is a research preview to gather preference data for reinforcement learning, which will improve the model, before a full launch. Q: You started a meaningful ad campaign for Reserved ticketing. How many concert tours have you worked with since? And are you starting to see an uptick in conversion to paid tiers to access Reserved? A: Co-CEO Alex Norstrom highlighted the early success of Reserved, noting it has supported multiple tours in the U.S. with nearly 100,000 tickets reserved. In some instances, they sold through 100% of allocations, prompting Live Nation to upsize mid-run. While it's still early, the feature is a "triple win" for fans, artists, and Spotify, and is currently focused on increasing the value-to-price ratio for premium rather than direct monetization. Q: Can you talk about the drivers of the implied acceleration in operating expenses in Q3? A: CFO Christian Luiga clarified that the expense growth in Q3 is expected to be roughly consistent with Q2, excluding currency and social charges. The elevated expenses are driven by the planned EUR200 million incremental investment for the year, focused on marketing and AI-related compute costs. These are variable and in the company's control, and they expect to moderate the rate of expense growth in Q4. Q: You've launched several AI-powered products in the last 6 months, including Prompted Playlists. Can you discuss what types of benefits you're seeing in the KPIs such as listening hours, conversion rates or churn? A: Co-CEO Gustav Soderstrom reported that AI-powered experiences now reach about 1/4 of active users, with Prompted Playlists already adopted by 14 million of the first 100 million users. More importantly, the new large taste model is moving the hardest metrics, such as active days, which have increased. Autoplay minutes and track sales have grown significantly, and drop-off has declined, all of which are powerful inputs to retention and lifetime value. Q: How should investors think about the scope for monetization efforts as a result of more interactive tools and live event integrations across the subscriber base? A: Co-CEO Alex Norstrom framed this as a TAM and pricing question, noting Spotify is close to 4% of the world's population and could potentially reach 15% penetration. The key to monetization is driving the value-to-price ratio upwards through interactive tools and add-ons. He cited Audiobooks+ as a prime example of an add-on that structurally increases ARPU beyond simple price increases, having already passed $100 million in annual recurring revenue. Q: Is there any read-through from the Apple Music price increase that was announced in July? And how does this impact your thinking about price increases going forward? A: Co-CEO Alex Norstrom declined to comment on competitors' pricing but noted the increase is an example of continued value in music streaming services, which is good for the ecosystem. He emphasized that Spotify's focus remains on category leadership in user scale and engagement, and that delivering more value will naturally lead to more pricing power. They are happy to be the price leader in the category. Q: You had solid premium net adds this quarter, but the record labels suggested the industry's premium growth slowed in the second quarter. How confident are you in the long-term growth of premium subscribers for the industry and Spotify? A: Co-CEO Alex Norstrom expressed strong confidence in long-term premium subscriber growth. He stated that the company is optimizing for a healthy funnel, and the recent product changes in emerging markets are aimed at helping subscriber growth, not slowing it down. He reiterated that the strategic adjustments will not come at the expense of subscriber growth. Q: Can you help us understand the timing of add-on rollouts across verticals? And how should we think about their impact on premium ARPU in the second half of this year and into 2027? A: Co-CEO Alex Norstrom declined to comment on specific launch timing or provide ARPU guidance. However, he highlighted that Audiobooks+ has doubled in revenue since the last update and continues to grow in select markets. He explained that successful add-ons like this structurally increase ARPU in a different way than a standard price increase, effectively acting as a "price increase" by adding more value. Q: Over the course of 2026, we've seen meaningful momentum in Open Source. How are you thinking about the costs and benefits of deploying Open Source more broadly versus how you're using Anthropics, Claude and other models today? A: Co-CEO Gustav Soderstrom stated that the Open Source movement is very helpful, as the large taste model is based on Open Source models with continued pre-training on proprietary data. They have built an internal tool called "Chirp" that allows engineers to switch between paid models and hosted Open Source models mid-task to get the best price performance. This control over context and spend ensures they are never locked in and benefit from falling token costs. For the complete transcript of the earnings call, please refer to the full earnings call transcript.