SPOT

Spotify Technology S.A. SPOT used its third-quarter 2026 earnings call to emphasize improving advertising trends, subscriber resilience and a slower pace of expense growth. Reported earnings of $2.85 per share missed the Zacks Consensus Estimate of $3.1, while revenues of $5.72 billion exceeded the $5.7 billion estimate. Management emphasized future engagement and profitability. Spotify Technology price-consensus-eps-surprise-chart | Spotify Technology Quote Chief financial officer Christian Luiga forecast 818 million monthly active users for the fourth quarter, an increase of 30 million, alongside 316 million Premium subscribers, reflecting 10 million net additions. Luiga guided to €5.2 billion in fourth-quarter revenue, a 33.8% gross margin and €820 million in operating income. Pricing actions and Audiobooks+ add-ons support the revenue outlook. He said that operating expense growth peaked in the third quarter and should moderate from the fourth quarter into 2027. He cautioned that seasonality and investment timing affect quarterly margins. Co-CEO Alex Norström said that constant-currency advertising revenue growth accelerated to 9% in the third quarter from 3% in each of the preceding two quarters. During questions about the advertising recovery, Norström pointed to easier automated buying, improved measurement and greater demand for audio advertisements. Podcast sponsorships contributed. Luiga said that the company expects to move closer to double-digit advertising growth in the fourth quarter. He noted that advertising represents 10% of revenue, limiting its immediate companywide impact. Co-CEO Gustav Söderström argued that integrations with third-party AI agents can broaden access without transferring Spotify's customer listening activity or proprietary taste data to those services. Addressing concerns about becoming a replaceable back-end provider, Söderström explained that playback remains within Spotify and its recommendation systems continue to interpret user preferences. He highlighted double-digit gains in content discovery from Spotify's large taste model. Almost 40 million Premium users listen to mixed playlists, with consumption up 90% quarter over quarter. Norström described the expansion of audiobooks from 22 markets to more than 180 by year-end as an opportunity to increase listening days, retention and subscriber lifetime value. During the discussion of rollout economics, he said audiobook listenership had increased 40%, and add-ons were showing encouraging monetization results. Luiga said initial expansion expenses are included in margin guidance. Söderström also discussed bringing the Spotify Partner Program to 35 additional markets and introducing creator memberships, widening opportunities for creators to monetize dedicated audiences. Norström emphasized durable subscriber demand across regions, while Luiga reported 306 million Premium subscribers and 788 million monthly active users at quarter-end. Asked about changes to the free tier in India and Indonesia, Norström described adjustments to sign-up data, advertising load and device experiences aimed at improving retention and eventual monetization. On pricing, Norström said that Spotify seeks to add value before monetizing through subscription increases, add-ons and advertising. The objective remains improving value to subscribers while expanding revenue opportunities. Luiga mentioned that Spotify repurchased 2.2 million shares for $1.1 billion through Oct. 21, offsetting employee-equity dilution and beginning to return excess cash to shareholders. With €9.9 billion in cash and equivalents at quarter-end and no debt apart from lease liabilities, management retained flexibility for organic investment and acquisitions. Norström reiterated that internal growth opportunities and selective acquisitions take priority over additional repurchases. Luiga emphasized opportunistic capital deployment. Across the call, management presented advertising improvement, broader content offerings and AI-powered personalization as ways to deepen engagement while protecting recurring subscription growth. Executives also reinforced expense moderation and margin discipline extending into 2027. Their near-term focus remains delivering fourth-quarter targets while funding new products. SPOT carries a Zacks Rank #5 (Strong Sell), indicating an unfavorable earnings-estimate revision profile. Its Growth Score of A signals stronger growth characteristics, while the Value Score of D and Momentum score of D point to weaker readings in those categories. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. The VGM Score of C reflects a middling combination of value, growth and momentum measures. The unfavorable Zacks Rank tempers the significance of the high Growth Score, and the rank can change as analyst earnings estimates are revised following the reported 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

- Interested in Spotify Technology? Here are five stocks we like better. - Spotify met or exceeded its Q3 targets: Revenue rose 14% year over year on a constant-currency basis to approximately €5 billion, while monthly active users reached 788 million and Premium subscribers climbed to 306 million. Gross margin expanded to 33% and operating income totaled €672 million. - Advertising growth and shareholder returns improved: Ad revenue growth accelerated to 9%, supported by automated advertising and podcast sponsorships. Spotify generated €735 million in quarterly free cash flow and repurchased $1.1 billion of shares through Oct. 21. - The company is expanding AI and audio offerings: Spotify reported early gains from AI-driven recommendations, plans to offer audiobooks in more than 180 markets by year-end, and expects Q4 revenue of €5.2 billion, 818 million monthly active users and 316 million Premium subscribers. - 3 Companies That Could Thrive While the Fed Holds Rates Steady Spotify Technology (NYSE:SPOT) reported third-quarter 2026 results that met or exceeded its guidance across revenue, monthly active users, subscribers, gross margin and operating income, while executives highlighted improving advertising growth, expanding audiobook availability and continued investment in artificial intelligence-driven features. Co-CEO Alex Norström said revenue totaled about €5 billion, rising 14% year over year on a constant-currency basis and landing in line with the company's forecast. Monthly active users reached 788 million, also in line with guidance, while Premium subscribers rose to 306 million, one million above the company's outlook. → Aurora Rejects Curaleaf's Higher Bid, But the Takeover Fight Isn't Over - MarketBeat Week in Review – 06/08 - 06/12 Premium revenue increased 15% on a constant-currency basis, supported by 9% subscriber growth and a 7.5% increase in average revenue per user, according to CFO Christian Luiga. Gross margin reached 33%, exceeding guidance by 10 basis points and expanding about 140 basis points from the prior year. "We made several commitments last quarter, and they've all landed either in line or better than expected," Norström said. → Could Quantinuum's Breakthrough Make Its Sell-Off a Bargain? - Spotify's "North Star" Outlook Was Music to Investors Ears Spotify's advertising business grew 9% in the third quarter on a constant-currency basis, accelerating from 3% growth in each of the first two quarters of the year. Norström said the improvement was driven by progress in rebuilding the company's advertising technology and sales infrastructure, including growth in automated channels and podcast sponsorship products. Luiga said automated biddable advertising represented 40% of the ad business and was a key contributor to the recovery. Spotify expects to continue progressing toward double-digit ad-supported revenue growth in the fourth quarter. → IonQ's Bold Expansion Could Leave Shareholders Paying the Price "It's much better to have 10% revenue growth or above than having a low single-digit growth," Luiga said when discussing the potential contribution of advertising to total company growth over time. Norström said Spotify's advertising opportunity remains supported by its brand, licensed content and listener engagement. The company is working to make its inventory easier to purchase through automation, improve advertiser measurement and simplify the creation of audio advertisements, he said. Operating income was €672 million, above the company's guidance, producing an operating margin of 13.5%. The quarter included €22 million in social charges related to share-price movements, which were €13 million higher than Spotify had forecast. Free cash flow totaled €735 million for the quarter, including unfavorable timing effects related to working capital and cash taxes. Over the past 12 months, Spotify generated €3.2 billion in free cash flow, Norström said. Spotify had $9.9 billion in cash and cash equivalents at the end of the quarter and no debt other than lease liabilities. Through Oct. 21, the company had repurchased 2.2 million shares for $1.1 billion, Luiga said. The purchases offset dilution from employee equity programs and marked the beginning of returns of excess cash to shareholders. Since resuming repurchases in August 2025, Spotify has bought back about 3 million shares, or roughly 1.5% of shares outstanding. Executives said the company's capital-allocation priorities remain organic investment, selective acquisitions and opportunistic shareholder returns. Co-CEO Gustav Söderström said Spotify is positioning itself for what he described as an "agentic" AI environment, in which users can interact with media services through AI assistants. He said Spotify has integrated with services and devices including ChatGPT, Meta Ray-Bans and Meta's Muse. Söderström emphasized that Spotify retains the listening experience and does not send its music catalog or user data to third-party agents. Instead, he said, external agents can interact with Spotify, which then uses its own data and recommendation capabilities to determine playback and content recommendations. The company said its AI investments have helped accelerate product development without increasing headcount. Söderström said Spotify is seeing double-digit gains in content discovery from early deployments of its large taste model, while users are spending more time in selected algorithmic experiences. Spotify also cited adoption of interactive music features. Nearly 40 million Premium users listen to mixed playlists, Söderström said, with consumption of those playlists up 90% quarter over quarter. The company said user-generated mixing activity provides additional signals that can improve recommendations and its AI capabilities. Meanwhile, Spotify plans to expand audiobooks to more than 180 markets by year-end, up from 22 markets. Norström said the company has seen audiobook listenership increase 40% over the prior three years and believes the category can increase active days, retention and customer lifetime value. The company also plans to expand its Spotify Partner Program to 35 additional markets during the fall and recently introduced Creator Memberships, allowing fans to support creators directly in exchange for member-only experiences. For the fourth quarter, Spotify forecast 818 million monthly active users, representing an increase of 30 million from the third quarter, and 316 million Premium subscribers, a net increase of 10 million. The company expects fourth-quarter revenue of €5.2 billion, with year-over-year ARPU growth of roughly 4.5% to 5%. The forecast reflects recent price increases and performance from Audiobooks+ add-ons, partly offset by the comparison with prior-year pricing actions in more than 150 markets. Spotify expects a fourth-quarter gross margin of 33.8%, about 70 basis points above the prior-year period, even as it funds the global audiobook expansion and broader availability of the Spotify Partner Program. For the full year, the company's outlook implies gross-margin expansion of approximately 130 basis points compared with 2025. Spotify forecast fourth-quarter operating income of €820 million. Luiga said operating-expense growth is expected to moderate meaningfully starting in the fourth quarter and continue declining into 2027, though the company did not provide formal 2027 guidance. Spotify Technology SA is an audio streaming company that operates the Spotify platform, offering users access to music, podcasts and audiobooks through internet-connected devices. Its catalog includes licensed recordings from music labels and artists, as well as podcasts and other audio content from creators and publishers. Spotify provides both an ad-supported service and subscription-based Premium plans. Premium subscribers generally receive ad-free listening and additional features, while the advertising-supported service allows users to access content without a paid subscription. 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 Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

- CFO Christian Luiga said AI investments have accelerated feature releases while headcount remained flat. - Advertising revenue grew 9% at constant currency, compared with 3% growth in each of the first two quarters. - For the Q4, Spotify forecast operating income of $918.4 million and 316 million premium subscribers. Spotify (SPOT) added 6 million paying subscribers to reach 306 million in the third quarter, and its co-CEO Gustav Söderström said during the earnings call that AI agents are not a threat to the company. According to him, Spotify is now an agent itself, and that other companies want to use the AI tools it built. "Spotify is now an agent that you can not only click on in our app, but talk to, ask questions of, and instruct," he said. "We can do things today that no other media services can do." Söderström added that tens of millions of people now speak to Spotify in English. See what 10M+ investors are talking about. Get the Stocktwits Daily Rip for what retail is watching right now, free to your inbox SPOT stock rose as much over 10% in morning trade, on track to hit a 10-month high, and was among the top trending tickers on Stocktwits at the time of writing. If gains hold, this could also be the stock's biggest single-day jump since May. The rally comes despite Spotify's third quarter (Q3) results missing Wall Street's expectations on revenue and earnings. Söderström said Spotify's AI capabilities could become a source of value beyond its own platform, with other companies expressing interest in using the technology. He called potential revenue from licensing or sharing the technology as "option value," rather than providing a firm financial forecast. The Co-CEO added that Spotify has already invested in developing its AI tools, and making them available to other companies could help spread those costs across a larger pool of developers. "This is a way for us to amortize those costs more efficiently. I'm not going to give any more guidance on this right now," Söderström said. Chief Financial Officer Christian Luiga said Spotify's AI investments are helping it release features faster without increasing headcount. "On AI, our investments have accelerated feature shipping, while keeping headcount flat." – Christian Luiga, CFO, Spotify Söderström added that the benefits are becoming visible in the products users experience. "We are seeing significant acceleration in end-user products," he said. The investments have nevertheless contributed to higher costs. Operating expenses rose 26% in the third quarter, driven mainly by marketing, cloud infrastructure and AI spending. Co-CEO Alex Norström said the increase was consistent with the company's earlier outlook, which called for operating expense growth to peak in Q3 before moderating from the fourth quarter (Q4) onward. Luiga said the moderation is expected to continue into 2027. Spotify's advertising business showed signs of improvement. Ad revenue grew 9% at constant currency in Q3, up from 3% in each of the first two quarters. "Further, our automated channels continue to scale, and sponsorship products are growing, particularly in podcasts," Luiga said. He said Spotify expects advertising to move toward double-digit growth in Q4, supported by automated biddable sales and podcasts. Automated biddable sales now account for 40%, according to Luiga. Overall, advertising contributes about 10% of Spotify's revenue. Luiga said the company sees room for improvement in the business, noting that sustained growth of 10% or more would be preferable to the low-single-digit pace seen earlier in the year. User growth, meanwhile, is expected to slow from last year's record pace. Spotify forecast 818 million monthly active users for Q4, an increase of 30 million. That would be below the 38 million users it added in the same quarter of last year, when it launched a new free tier. Spotify is also approaching another round of negotiations with major music labels. An analyst noted that the company's agreements with Universal Music Group and Warner Music Group reach their two-year mark in the first quarter of 2027. "This is a recurring two-year rhythm that we've more or less had forever. Now we're coming up on another one," said Luiga. "And we're excited. We're working with our partners. The relationship is just improving, and it's improving primarily because our interests are aligned." Spotify's reported Q3 revenue of €4.69 million ($5.57 billion), marginally below the expected $5.6 billion as per Koyfin. Earnings per share (EPS) came in at $2.82, missing Wall Street forecast of $3.19. Premium subscribers rose 9% to 306 million, above guidance of 305 million. Operating income was $752.6 million, against guidance of $750.4 million. For the Q4, Spotify forecast operating income of $918.4 million and 316 million premium subscribers. On Stocktwits, retail sentiment around Spotify flipped to 'bullish' from 'bearish' territory over the past day. Chatter increased to 'high' from 'normal' levels. Platform data showed a 300% uptick in message volume. One retail trader pointed to the improvement in advertising growth, noting that the 3% pace recorded in each of the first two quarters had raised concerns about the business. SPOT stock has traded flat this year and fallen around 15% in the last 12 months. (Conversion rate: €1 = $1.12) Read also: Nvidia's Jensen Huang Wants AI Chips To Be A 'Financeable Asset,' Says Neocloud Demand Is 'Off The Charts' For updates and corrections, email newsroom[at]stocktwits[dot]com. Prabhjote Gill 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: - WDC Slides Overnight Post-Earnings Despite Goldman's Upside Call — CEO Sees Top Customers' Storage Demand Into 2031 - DECK Stock Tumbles Overnight: HOKA Maker Sees 'Measured Growth' Over Next 2 Quarters As Consumers Seek Discounts - SOXX, SOXL, SMH Plunge As Chip Stocks Sell Off Amid Supply Chain Concerns

Spotify Technology (SPOT) projected strong fourth-quarter revenue, while the company said it is counting on its artificial intelligence investments to sustain its growth momentum, sending its shares higher in Thursday trade. For the December quarter, the audio-streaming platform is looking at revenue of 5.2 billion euros ($5.82 billion), representing an acceleration annually and sequentially. Analysts in a FactSet poll expect 5.23 billion euros, which would indicate about a 15% jump from 4.53 billion euros a year earlier. Spotify's revenue for the September quarter surged 16% to 4.97 billion euros, compared with the consensus of 4.98 billion euros. Earnings per share fell to 2.48 euros from 3.28 euros a year earlier, while analysts expected 2.80 euros. "We have another solid quarter behind us," Chief Financial Officer Christian Luiga said during an earnings call, according to a FactSet transcript. "We added 6 million net subscribers during the quarter, growing quarter-over-quarter, across all regions. We reached 306 million, which was 1 million ahead of our guidance." The company's AI investments are also paying off, company officials said. "On AI, our investments have accelerated future shipping while keeping head count flat, setting the business up for further engagement and monetization potential," Luiga said. Spotify's New York Stock Exchange-listed shares were up 7.2% intraday. The stock is down about 2% this year. "Spotify is now an agent that you can not only click on in our app, but talk to, ask questions of, and instruct," Co-Chief Executive Gustav Soderstrom told analysts. "We are betting on consumers using many agents and that Spotify will be by far the best media platform for licensed content inside and across all these agents." On Tuesday, Spotify said it has signed a licensing deal with digital music company Believe for its upcoming tool that lets users make AI remixes and covers of songs while paying the artists behind them. Monthly active users increased 11% in the third quarter to 788 million, while Wall Street expected 788.2 million. Premium subscribers increased 9% to 306 million, though analysts projected growth to 305.1 million. In a recent note, Morgan Stanley said Spotify's shares should move higher, driven by factors such as its path to a reacceleration in revenue growth and margin expansion. The brokerage expects features including audiobooks, video podcasts, and generative artificial intelligence mixing tools to highlight product innovation and support long-term margin expansion at the audio-streaming platform, as user engagement deepens.

Spotify (SPOT) came out with quarterly earnings of $2.85 per share, missing the Zacks Consensus Estimate of $3.1 per share. This compares to earnings of $3.83 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -8.07%. A quarter ago, it was expected that this music-streaming service operator would post earnings of $3.27 per share when it actually produced earnings of $3.03, delivering a surprise of -7.34%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Spotify, which belongs to the Zacks Internet - Software industry, posted revenues of $5.72 billion for the quarter ended September 2026, surpassing the Zacks Consensus Estimate by 0.32%. This compares to year-ago revenues of $4.99 billion. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Spotify shares have lost about 9.5% since the beginning of the year versus the S&P 500's gain of 13.3%. While Spotify has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Spotify was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.67 on $5.99 billion in revenues for the coming quarter and $13.66 on $22.38 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Weave Communications, Inc. (WEAV), has yet to report results for the quarter ended September 2026. This company is expected to post quarterly earnings of $0.04 per share in its upcoming report, which represents a year-over-year change of +100%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Weave Communications, Inc.'s revenues are expected to be $69.23 million, up 12.9% from the year-ago quarter. 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 Weave Communications, Inc. (WEAV) : 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. - Management attributes the quarter's success to 'durability at scale,' noting that the company has consistently added 25 million or more subscribers annually since 2018 despite macro headwinds and price increases. - The 140 basis point year-over-year gross margin expansion was driven by a deliberate balance between high-engagement content acquisition and operational efficiencies. - Advertising revenue growth accelerated to 9% as the company began to realize the benefits of a multi-quarter rebuild of its automated biddable sales channels and podcast sponsorship products. - Strategic positioning is focused on 'anticipation' rather than just extrapolation, specifically regarding the shift toward an agentic media platform where Spotify acts as an intelligent assistant. - The company is optimizing its MAU funnel in emerging markets like India and Indonesia by introducing 'business positive' friction, such as better data hygiene and migrating users to higher-retention device clients. - Management views the Swedish market—where nearly 50% of the population pays for Spotify—as a blueprint for global potential, contrasting it with the current sub-4% global penetration. - Q4 guidance assumes a moderation in operating expense growth, following a peak in Q3, as the company shifts from a heavy investment phase toward sustainable margin expansion. - The expansion of audiobooks to over 180 markets by year-end is expected to enhance subscriber lifetime value and active listening days, serving as a global growth engine. - Management expects advertising to continue its progress toward double-digit growth in Q4, supported by the scaling of automated channels and the Spotify Partner Program. - Future monetization strategy relies on a 'value to price ratio' framework, where continuous product enrichment (like AI features and remixes) justifies future pricing actions and add-on tiers. - The company anticipates that its 'Large Taste Model' will drive billions of incremental listening hours by improving content discovery and user retention through personalized algorithmic sets. - Spotify has neutralized 2026 employee equity dilution by repurchasing 2.2 million shares for $1.1 billion, signaling a shift toward returning excess cash to shareholders. - The company maintains a strong cash position of $9.9 billion to preserve 'strategic flexibility' for potential inorganic growth opportunities or opportunistic buybacks. - Social charges of EUR 22 million were EUR 13 million higher than forecasted due to share price volatility, though this was offset by favorability in marketing and personnel costs. - The launch of Creator Memberships and the expansion of the Spotify Partner Program represent a strategic move to capture the 'power law' of superfan monetization. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management clarified that listening is not 'shifting' to third-party agents; rather, agents remote-control Spotify in the background, keeping the data loop within Spotify's ecosystem. - The 'ubiquity strategy' ensures Spotify remains the preferred back-end for licensed content across all emerging AI interfaces, similar to previous integrations with Waze and Google Maps. - While declining specific 2027 guidance, management emphasized a three-step recipe: adding value to the free tier, enriching Premium, and then identifying the best mechanism (ads, price, or add-ons) to capture that value. - The focus remains on 'niche audiences' and 'power law' products that allow superfans to spend more directly on the platform. - Management reported significant acceleration in 'definitions of done' (shipped features) over the last six-month cycle due to AI-assisted development. - AI investments are already yielding double-digit gains in content discovery and are on track to add billions of listening hours annually. - Management characterized recent actions as 'routine improvement' of verification methods rather than a one-time crackdown, aimed at closing loopholes in a mature subscriber segment. - This is viewed as an ongoing operational hygiene task with no specific completion date or disclosed one-time financial target.

This article first appeared on GuruFocus. - Total Revenue: EUR5 billion, up 14% year over year (constant currency), in line with guidance. - Premium Revenue: Up 15% year over year, driven by 9% subscriber growth and 7.5% ARPU expansion. - Ad-Supported Revenue: Grew 9% year over year, up from 3% in each of the first two quarters, led by automated biddable sales channel. - Gross Margin: 33%, beating guidance by 10 basis points; ~140 basis points year-over-year expansion. - Operating Income: EUR672 million, slightly above guidance. - Operating Margin: 13.5%. - Social Charges: EUR22 million, EUR13 million higher than forecast due to share price movements. - Free Cash Flow: EUR735 million in the quarter; EUR3.2 billion generated over the past 12 months. - Monthly Active Users (MAU): 788 million, up 11% year over year, in line with guidance. - Premium Subscribers: 306 million, net addition of 6 million, one million ahead of guidance. - Cash and Equivalents: $9.9 billion with no debt other than lease liabilities. - Share Buybacks: 2.2 million shares repurchased for USD1.1 billion year to date; ~3 million shares (~1.5% of shares outstanding) since resuming buybacks in August 2025. - Q4 Revenue Guidance: EUR5.2 billion, with ARPU increase of 4.5% to 5%. - Q4 Gross Margin Guidance: 33.8%, ~70 basis points above prior year; implies full-year gross margin expansion of ~130 basis points. - Q4 Operating Income Guidance: EUR820 million. - Q4 MAU Guidance: 818 million (increase of 30 million from Q3). - Q4 Subscriber Guidance: 316 million (net addition of 10 million). - Warning! GuruFocus has detected 5 Warning Sign with NDAQ. - Is SPOT fairly valued? Test your thesis with our free DCF calculator. Release Date: October 22, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Subscribers reached 306 million, beating guidance by 1 million, with growth across all regions. - Premium revenue grew 15% year over year, driven by subscriber growth and ARPU expansion. - Gross margin expanded to 33%, a significant year-over-year improvement. - Advertising revenue grew 9% at constant currency, up from 3% in the first half, with automated channels scaling. - Free cash flow generation is strong, with EUR3.2 billion over the past 12 months, enabling share buybacks and strategic investments. - MAU growth is slowing, with Q4 guidance of 30 million net adds, lower than last year's all-time high. - ARPU growth is expected to moderate to 4.5-5% in Q4 due to lapping prior price increases. - Operating expenses remain elevated, though growth is moderating; continued investment in AI and cloud could pressure margins. - Audiobooks expansion to 180 markets may initially dilute margins due to upfront investments. - Family Plan verification improvements could cause some subscriber churn as ineligible users are removed. Q: As listening shifts to third-party AI agents like Muse, who owns the customer relationship and the data, and how does Spotify avoid becoming a back-end supplier? A: Co-CEO Gustav Soderstrom pushed back on the premise, noting listening is not shifting agents simply remote control Spotify in the background, so listening still happens through Spotify. He framed the agentic age as an extension of Spotify's ubiquity strategy (like its earlier eSDK bet on connected speakers), with Spotify rebuilt as an agent that other agents can integrate with. Crucially, content created via third-party agents (e.g., a personalized podcast) gets published into Spotify, creating a positive data loop for Spotify rather than the reverse. "We are not sending the data to these partners," he said, adding that Spotify's large taste model does the reasoning over what it knows about the user. Q: As agents compare subscription prices and cancel unused services, is churn from agents a real risk could Spotify become an interchangeable back-end pipe? A: Co-CEO Gustav Soderstrom argued Spotify is among the best-positioned services for the agentic age because it never bets on breakage or users forgetting their subscriptions. He noted over 100 million users engage with Spotify roughly 28 days a month, and "basically no one" subscribes without realizing it. He compared agent integration to Spotify's long-standing presence inside Google Maps and Waze an interface in front of Spotify that drove growth rather than commoditization. "On that list of things that you unsubscribe from, Spotify is going to be the last thing," he said, adding agents could even help users recognize Spotify as the better deal. Q: With many new product rollouts (global audiobooks, expanded Partner Program, Taste Profile), what is the 2027 roadmap for monetizing these through new tiers, add-ons, or price increases? A: Co-CEO Alex Norstroem declined to give 2027 specifics but outlined the underlying recipe: add value to the free tier (the new free tier launched about a year ago keeps yielding results), enrich the Premium tier (he said he can't recall a year in Spotify's history with so much value added back to Premium), and create products for niche/power-law audiences. The final step is monetizing that value through advertising, price increases, add-ons, more subscriptions, and better engagement across more days of the month a "simple but very powerful recipe" deployed for many years. Q: How should investors think about the forward trajectory of growth investments, especially across AI and cloud, versus the potential for scaling AI-led experiences? A: Co-CEO Gustav Soderstrom said the company invested ahead earlier this year and, as promised, costs are now moderating in Q4 and into 2027. On returns, the Large Taste Model is already driving double-digit gains in content discovery and is on track to add billions of listening hours per year; tens of millions of people now speak to Spotify in English; and mixing tools are scaling rapidly. On productivity, he said Spotify is past early metrics like lines of code and now sees significant acceleration in shipped end-user features across six-month development cycles, translating into engagement, retention, and, for audiobooks, direct ARPU. He expects investment to remain roughly at these levels. Q: While ads growth recovered as expected, is there a realistic path where advertising lifts Spotify's overall revenue growth rate could that be a 2027 event? A: CFO Christian Luiga said ads are recovering as expected toward double-digit growth in the second half of 2026, with Q4 continuing that progress, driven by biddable (now up to 40%) and podcasts. He noted that even though ad-supported is only about 10% of revenue today, growing that segment at double digits or above rather than low single digits will meaningfully contribute to total revenue growth going into 2027. Q: How has demand been for new features like Taste Profile and Prompted Playlist, and how do you balance raising prices against growing the subscriber base? A: Co-CEO Alex Norstroem explained Spotify's "value to price ratio" framework: the goal is for subscribers to win over time. The first 15 years focused on adding value (better product and content), and at scale Spotify began price increases to monetize and reinvest into more value. Co-CEO Gustav Soderstrom added that demand for AI-based features is strong About the Song is approaching 100 million users, with tens of millions talking to Spotify and listening to agentic sets. Q: With the Universal Music Group and Warner Music Group deals reaching their two-year mark in Q1 2027, how do 2027 pricing plans and add-on tiers factor into renewal talks, and will deals be structured like current ones? A: Co-CEO Alex Norstroem declined to discuss specifics but noted this is a recurring two-year rhythm that has existed for most of Spotify's lifetime. He said the relationship with partners is improving primarily because interests are increasingly aligned, making win-win situations easier to create. Q: How should we think about the margin impact of expanding audiobooks from 22 markets to more than 180 by year-end, and can you see similar positive benefits as in early launches? A: Co-CEO Alex Norstroem said Spotify sees similar positive benefits, which is why it is going broad to become the first global audiobooks business. He recounted how audiobooks emerged almost three years ago when users in Germany uploaded them organically. Since then, audiobook listenership is up 40% even before the global launch, listening hours have grown, active days have increased (driving retention and lifetime value), and add-ons show early strong indications. On margin, he said Spotify has set targets at Investor Day and is marching toward them. Q: It appears you've stepped up share repurchases. How are you approaching capital allocation with free cash flow ramping, and is there room to increase the buyback cadence? A: Co-CEO Alex Norstroem reiterated the priority of investing in organic opportunities with good returns, then inorganic deals (citing WhoSampled for About the Song, Findaway for audiobooks, and Sonantic for AI DJ), with excess cash going to buybacks. Spotify has repurchased 2.2 million shares for about $1.1 billion this year, neutralizing employee equity dilution and initiating returns of excess cash. CFO Christian Luiga added that Spotify will maintain strategic flexibility with a strong balance sheet while returning excess cash, as proven this quarter. < For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Thursday, Oct. 22, 2026 - Head of Investor Relations - Bryan Goldberg - Co-Chief Executive Officer - Alex Norström - Co-Chief Executive Officer - Gustav Söderström - Chief Financial Officer - Christian Luiga Operator: Good day, and welcome to Spotify's third quarter 2026 earnings call and webcast. All participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. As a reminder, this conference call is being recorded. I would now like to turn the call over to Bryan Goldberg, Head of Investor Relations. Thank you. Please go ahead. Bryan Goldberg: All right. Thanks, operator, and welcome to Spotify's third 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, S-L-I-D-O dot com, and using the code hashtag SpotifyEarningsQ326. 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 email 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. With that, I'll turn it over to Alex. Alex Norström: Thank you, Bryan, and hello, everyone. Thanks for joining us. Let me just start with the strength of the quarter. We made several commitments last quarter, and they've all landed either in line or better than expected. Our revenue came in right in line with what we guided at about EUR 5 billion, up 14% at constant currency. MAU also landed right on target at 788 million. As we shared last quarter, we're optimizing our MAU growth across markets to scale our funnel and drive revenue growth over time. Subscribers came in ahead at 306 million, beating our guidance by one million. That strength shows up where it matters the most. Premium revenue grew 15%, driven by both subscriber growth and higher ARPU. Gross margin also came in ahead of expectations at 33%. This is a significant year-over-year expansion. Over the past 12 months, we've generated EUR 3.2 billion in free cash flow. Ads is one of the areas of our business that I've spent time talking about, so I want to share our progress. We've been open with you that we're rebuilding this business, and we said the momentum would start to show in the second half of the year. In Q3, Ads grew 9% at constant currency, up from the 3% in each of the first two quarters. Further, our automated channels continue to scale, and sponsorship products are growing, particularly in podcasts. We're moving in the right direction and there's more progress ahead. On OpEx, we told you this would be a year of investment, with operating expense growth peaking in Q3 and then moderating from Q4 and on. That's exactly what's happening. Christian Luiga will walk you through the details further, but as we know from experience, investing in our product, features, and brand strengthens our position, and we can see that playing out right now. To build on this further, I'd like to use the rest of my time on what I think is an underappreciated part of our story: durability. When we went public in 2018, we had 71 million subscribers. Since then, every single year, we've been adding 25 million subs or more. This year, we expect to reach 316 million subscribers. As I've mentioned before, very few consumer subscription businesses have ever reached this scale and few are still adding at this pace. Through a pandemic, price increases, and a changing economy and consumer landscape, this steady growth in subscribers hasn't stopped. This quarter, that growth came from every region. That's what durability looks like. Looking across the broader subscription landscape, you all know that not all subscribers are created equal. Spotify not only enjoys industry-leading engagement, but we also have the most passionate and engaged music, podcast, and book fans in the world on our platform. We're not just an app or a product sitting on a phone, and that's why we continue to grow and take share. Every time we expand what's on Spotify, we bring in new listeners, and we give existing ones more reasons to come back, almost every day. Sweden is a clear demonstration of how high the opportunity can go. In our first and most established market, nearly 50% of the population pays for Spotify. Globally, that figure is still under 4%, and in key markets like the U.K. and Germany, it's between 20% and 25%. Latin America is around 11%, and then across emerging markets, we're less than 3%. What makes our position unique is how balanced it is. In developed markets, we're growing a highly engaged monetizing base with a lot more room for growth. In emerging markets, we're still early, with hundreds of millions of subs to come. This is a growth engine that compounds, building a bigger recurring revenue base. This is durability at scale. We also kept adding to what a subscription is worth this quarter. We signed a new multi-year agreement with Joe Rogan, whose show remains the world's most popular podcast. We added Believe and TuneCore as a partner for remixes and covers. Remixes are as old as music itself, and we're working on a version that fans love and rights holders trust, with consent, credit, and compensation at the core. And as we've recently announced, we are expanding audiobooks to more than 180 markets by the end of the year, making Spotify the world's first global audiobook service. This enhances subscriber lifetime value, add-on monetization, and will benefit Spotify around the world. Gustav will share more about this. This was a quarter where we did what we said. We've built a strong business that keeps compounding. We invest when we see a path for growth, our costs are moderating, and there's more runway ahead. And having seen a preview of this year's Wrapped, I'm really looking forward to Q4 with a lot of excitement, and I can't wait to see how our fans respond. With that, let me hand it over to Gustav. Gustav Söderström: Thank you, Alex. Alex just spoke about durability at scale, and I want to share how we're creating that. At a recent Investor Day, I talked about two ways to predict the future. You can extrapolate what is already happening, or you can anticipate what's about to change. And when the world shifted to mobile in 2007, we needed to do a lot of anticipation, imagining and building for a world that we thought would happen, but that didn't exist yet. This worked out well for us, and we accelerated in that new world. For much of the following decade, we, and everyone else, could instead largely rely on extrapolation of what already existed. That would be more phones, more ads, more catalog, et cetera, which also got us very far. I don't think it's escaped anyone on this call, but today we are clearly in an era where anticipation is much more important again. Today, I want to talk about three things that we anticipated some time ago that are now becoming real, and the effects of those. First up is agents. On our fourth quarter call back in February, I said that we were building the world's first truly intelligent agentic media platform. That may have sounded a little bit abstract at the time, but it's hopefully becoming clearer now. What we meant was an intelligent media service encapsulated as an agent, whether you use it directly through our application or via another agent. We made a bet that consumers using services like ChatGPT would also start demanding intelligence from their media service. We built for that. Spotify is now an agent that you can not only click on in our app, but talk to, ask questions of, and instruct. We can do things today that no other media services can do. For example, you can ask Spotify to go through your listening history song by song back to 2008, picking your true favorites, beat-stretching them by speeding them up or down, and then sorting them by key and BPM. Then you can ask it to mix them together into the perfect running playlist at your exact cadence. But that's not all you can do. You can also ask Spotify exactly who wrote and performed what on each track. And if you want to shift gears entirely, we can also generate an individual podcast just for you, as well as recap the book you're reading up until exactly where you stopped. As we prepared for this agentic world, we also thought through what our ubiquity strategy would mean in an agentic age. Spotify's strategy has always been to be the best experience wherever people listen. As an example, nearly a decade ago, as connected speakers took off, we rebuilt our entire technology stack to make Spotify very easy to integrate across speakers, something called the eSDK. TVs, gaming consoles, and other devices. That investment turned the growth of the connected device industry into a tailwind for Spotify, one that actually continues to pay off even today. For the agentic age, we are betting on consumers using many agents, and that Spotify will be by far the best media platform for licensed content inside and across all these agents. Before most people were regular users, we integrated Spotify into ChatGPT, making Spotify the first service available. This was also the case with Meta Ray-Bans, OpenAI's Dots, and we were the only media service integrated into Meta's Muse at launch. The list goes on and on. We are simply everywhere. So that whenever you find a great song, a book, or a podcast, or even want to create a podcast of your own, it's right there. You just save it, playlist it, and it shows up in Spotify in your morning commute. Importantly, this is not just a technology strategy. It's also a business strategy. We think Spotify is unusually well-positioned for the age of agentic AI. This is because Spotify, unlike most companies, can monetize from the background. Whether you're a Premium user or a free user listening to our audio ads, our business model not only works but thrives while Spotify is in the background. This is actually not something new. The Spotify app has been in the background of apps like Waze and Google Maps during the commute for decades now. Zooming out, Spotify is in one of the few categories that actually stands to thrive in the agentic age. This is because agents, as I'm sure you know, excel at replacing and taking care of things that people would rather not do, like maybe paying bills, answering emails, booking restaurants, checking your kids' school schedule, et cetera. This is where you see services like Muse absolutely thriving. People love getting rid of chores. But entertainment is the opposite. Nobody asks an agent to summarize a song for them. The whole point of getting rid of these chores is to free up even more time for the things that you actually enjoy. The second thing that we anticipated was moving Spotify from a passive and single-player experience to an interactive and multiplayer experience. You know our multiplayer offerings. We've talked a lot about them. Popular features like messaging, Jam, collaborative playlists, and comments. Today I'd like to spend a moment on the interactivity side. The original interactive experience on Spotify was not surprisingly playlisting. Millions and millions of people put songs together and helped organize the world's music library. That became the foundation of our recommendation engine. Last quarter, I talked about SongDNA as one of our all-time fastest-growing features. This quarter, Mixing Tools offers another example of what happens when people can do more with their music. We started rolling Mixing Tools out about a year ago, actually. It was good then. It is much better now. Almost 40 million Premium users now listen to mixed playlists. Consumption is growing 90% quarter-over-quarter, and millions of people create mixes of their own each month. Why does this matter? Playlists always told us which songs go well together, but mixing also tells us exactly how and when they fit, down to the millisecond. Those signals improve our large taste model, our recommendations, and what the Spotify agent can do. Better recommendations strengthen retention over time. It also tells us something encouraging about the future of remixing. Give people good tools, and they will invest in shaping the music themselves. The third thing that we anticipated was the opportunity in books. When we first discussed audiobooks, we said our geography gave us a unique perspective. In Sweden, audiobooks are almost as big as music, and we wondered whether that was purely Swedish behavior or simply early behavior. What we're seeing now suggests the latter. That's why we're expanding audiobooks. We want to grow the market itself by giving hundreds of millions of people a great, affordable way to listen, not just compete for shares of today's market. When people adopt audiobooks, they come to Spotify on more days. Audiobooks started as a bet. It's now a global business, and it's still early. All of this connects to how we're building an even stronger subscription business. In addition to the growth of audiobooks and Premium, we're expanding the Spotify Partner Program, a fan favorite among passionate podcast listeners, to 35 more markets this fall. Two days ago, we launched Creator Memberships, so fans can directly support creators and get member-only experiences. This is another example of capturing the power law that we discussed at our Investor Day back in May. There is a power law within each creator's audience. Some fans want to go deeper and are willing to spend more, and now they can do that right on Spotify. These offerings will add value as they scale, and where we've offered audiobooks and the Spotify Partner Program the longest, they're contributing to acquisition, retention, active days, and margin improvement. With that, I'll hand it over to Christian. Christian Luiga: Thank you, Gustav, and thanks everyone for joining us today. I'll cover the quarter three 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 have another solid quarter behind us. Starting from the top, MAU grew in line with our guidance of 11 million to 788 million, up 11% year-over-year. We added six million net subscribers during the quarter, growing quarter-over-quarter across all regions. We reached 306 million, which was one million ahead of our guidance. Our outperformance was broad-based and led by rest of the world and Latin America. Total revenue was EUR 5 billion, growing 14% year-over-year. Premium revenue rose 15% year-over-year, driven by subscriber growth of 9% and ARPU expansion of 7.5. Ad-supported revenue growth improved to 9%, as Alex Norström said, this quarter led by strong growth in our automated biddable sales channel. Our gross margin came in at 33%, surpassing guidance by 10 basis points and representing year-over-year expansion of around 140 basis points. Operating income of EUR 672 million was a bit above our guidance, delivering on operating margin of 13.5%. Social charges of EUR 22 million were EUR 13 million higher than forecast due to share price movements in the quarter. Excluding the non-forecasted social charges, we came in EUR 15 million above guidance, driven by favorability in marketing, personnel-related costs, and gross margin outperformance. Finally, free cash flow was EUR 735 million in the quarter and included unfavorable timing effects in working capital and cash taxes. Year to date through October 21st, we have repurchased 2.2 million shares for $1.1 billion U.S. This means that we have neutralized this year's dilution from our employee equity programs, and we have also initiated the return of excess cash. Since we resumed our buybacks in August 2025, we have repurchased about three million shares, or approximately 1.5% of shares outstanding. Our capital allocation strategy remains focused on attractive return opportunities, first through organic and inorganic growth initiatives, followed by opportunistic returns to shareholders. As of the close of the quarter, we had $9.9 billion in cash and cash equivalents and no debt other than lease liabilities. Looking ahead to quarter four, we are forecasting MAU of 818 million, an increase of 30 million from quarter three. Our guidance reflects healthy growth across all regions. Growth is not as high as last year's all-time high, which benefited from a very successful rollout of our new Spotify free tier. On subscribers, we're forecasting 316 million for quarter four or a net addition of 10 million. We're also forecasting total revenue of EUR 5.2 billion in quarter four. This reflects a year-over-year ARPU increase of 4.5% - 5%, driven by recent pricing actions and the performance of our Audiobooks+ add-ons. This is partly offset by the lapping of prior year pricing actions across more than 150 markets. Our advertising business is coming out of a longer period of single-digit growth. In quarter four, we expect to continue our progress towards double-digit growth. We anticipate a quarter four gross margin of 33.8%, approximately 70 basis points above prior year. Our gross margin outlook includes the initial investments in the expansion of audiobooks to more than 180 markets and the Spotify Partner Program to more than 50 markets. These rollouts can drive new value for our subscribers and the business, the same way we have seen it over the last three years. Taken together with the first nine months of the year, our quarter four outlook implies a full-year gross margin expansion of approximately 130 basis points compared to 2025. Moving to operating income, we're guiding to EUR 820 million in quarter four. OpEx growth is now coming down meaningfully, and we expect that moderation to continue into 2027. We see that this year's incremental OpEx is driving multiple benefits to our business. Our marketing investments have helped consumer awareness of the value we deliver, supporting future subscriber growth and monetization. On AI, our investments have accelerated feature shipping while keeping headcount flat, setting the business up for further engagement and monetization potential. Our taste model investments are already paying off. Early deployments show double-digit gains in content discovery, and our users are spending more time in select algorithmic sets. As we have said before, we remain focused on striking a clear balance between enhancing LTV and sustainable margin expansion. In conclusion, we are very pleased with how we are tracking into the end of 2026. It is too early to give guidance on 2027, and as I have said before, quarterly progression of our margin can be variable due to seasonality and the timing of investments. We remain confident in our path and expect another year of progress towards delivering on our 2030 goals. We are well-positioned to continue compounding growth, profitability, and free cash flow. With that, I hand it back to you, Bryan. Bryan Goldberg: All right. Thanks, Christian. Again, if you have got any questions, please go to slido.com, #SpotifyEarningsQ3 2026. We will be reading the questions in the order in which they appear in the queue with respect to how people vote up their preference for questions. Today's first question is going to come from Sean Diffley, and it is on the free tier. Please discuss early learnings in markets like India and Indonesia, where you are adding some friction to the ad-supported tier, and how we can think about conversion to paid in those markets. Alex Norström: Thanks for the question, Sean. It has been voting up as the most important question here in the queue, so let us go right at it. Last quarter, I was making a few comments on some changes that we are making to our product and our funnels and in particular, in emerging markets, and you are mentioning two of them here. These changes include things like better data hygiene in our sign-up flows, ad load adjustments, and effort around migrating users from lower-end device clients over to a better client that retains you better and thereby giving you higher LTV and so on. All of these things that we are doing, that you are alluding to and I just spoke to, are business positive. These are good things for our free tier. These are good things for our subscription tier and thereby also for our revenue. We have a long track record of durable growth. I just spoke about that in our initial remarks here. This durability that we have been talking about is really the result of a lot of these types of optimizations, and this is just another example of that. Speaking of India specifically, it is a market where we have 1.4 billion users. We see GDP growth of 7%-8% several years in a row. What better market is there for us to work on to improve our business growth? I see no other. This is an incredible market and tremendous opportunity for us. Bryan Goldberg: All right. We're going to have another question from Sean Diffley, this time on capital allocation. It appears you've stepped up the pace of share repurchases. Can you discuss how you're approaching capital allocation with free cash flow ramping, and is there room to increase the buyback cadence further? Alex Norström: I'll start and then you can jump in, Christian. We mentioned during our Investor Day, now almost half a year ago, that the way we approach this is, we will invest in organic opportunities primarily. As we see good return, we will deploy, and you've seen us do that. With respect to inorganic opportunities, we will do those too, but there's no real change there. You've seen us do that many times before, with companies like WhoSampled, who helped us provide a unique data set to ramp About the Song, which is now used by almost 100 million people. You saw us acquire Findaway, which helped us accelerate audiobooks. You saw us buy Sonantic, which helped us do AI DJ. We'll continue to do this as we see opportunity. Beyond that, if there is excess cash, we will start engaging in buying back shares. You've seen us do that this year. We've mentioned that we're going to buy back shares to counter the dilution that's coming from the employee stock programs. You've mentioned that's about one million shares, and we've done that. We're now up to 2.2 million shares in buybacks, totaling about $1 billion or a little more than $1 billion. We're making progress also there. Christian, is there anything you would like to add? Yeah, I just want to wrap it up by saying that we will maintain a degree of strategic flexibility with a strong balance sheet. You will see us have a strong balance sheet and a cash balance that makes us be flexible in strategic moves. Christian Luiga: At the same time, as Alex said, it's obvious with the cash flow we have compounding and on the balance sheet that we will start to return excess cash to shareholders, which we've proven this quarter. Bryan Goldberg: All right, our next question is going to come from Jessica Reif Ehrlich on our ubiquity strategy. As listening shifts to third-party AI agents, as with the new Muse integration, who owns the customer relationship and the data, and how do you keep that from turning Spotify into a back-end supplier? Gustav Söderström: Thank you, Jessica. It's a great question, so I get the chance to talk about things I love. A few things. First of all, it's important to say that listening is actually not shifting. All the listening is happening through Spotify. We are not sending the music or anything to any of these agents. What is happening is you are talking to that agent, which remote controls Spotify in the background. The listening is not shifting. It's actually happening and thus increasing through Spotify. How we think about this, though, is, as I said in my prepared remarks, as another example of the ubiquity strategy. When connected speakers started happening, we tried to figure out how we turn that into a tailwind for Spotify and grow with the connected speaker market. As I said, we rebuilt our technology stack, something called the eSDK, the embeddable SDK, making it dead easy for any speaker provider to integrate Spotify. That turned into a great growth vehicle for us. This is why we're ubiquitous today. Thinking the same way about this, we rebuilt Spotify as an agent, so that it's dead easy for other agents to integrate us and talk agent to agent. What this means is that inside an agent like Muse, you can say, "I would like to create a podcast about this and that," that you've been talking to the Muse agent about. This podcast gets published to Spotify, but only visible to you so that you can listen to it in the morning commute. What happened there is actually that we learn more about you because that podcast is now inside Spotify. We know things that we wouldn't have known otherwise about your interest. This is actually a positive data loop for Spotify rather than the other way around. This is the reason why we made all of these investments, specifically the large taste model. I've gone on and on about it, but this is the reason we built this, because this is a value of Spotify. Our agent is the best in the world at understanding your taste across all of these mediums. We are not sending the data to these partners. They are asking us about something. We do the reasoning over everything we know about you and then decide what to play for you. This is also the reason why we built all of this technology, as I talked about in my prepared remark, to be able to stretch the music, put it together in the right way. As you know, we are also investing in remixes and covers and so forth. Our goal is to be the media service that you use from any agent, really turning the growth of agents into a tailwind rather than a headwind. That is exactly what we are seeing now. We are seeing really good adoption of Spotify inside these agents. While other companies are maybe trying to figure out what to do and many are leaning out, we are actually leaning in and participating in the growth instead of standing by the roadside and looking at it. We are very excited about this. This is why we said we were going to be the world's first truly intelligent media service, and this is why we have invested in all of this technology. Bryan Goldberg: Okay, we have got another question from Jessica Reif Ehrlich, this time on the Premium business. In the third and fourth quarter, there are many new product rollouts from Audiobooks+ globally to Reserved Fitness and the expanded Spotify Partner Program, Taste Profile in the U.S. et cetera. What is the 2027 roadmap for monetizing all of these products and features, through new tiers, add-ons, or price increases? Alex Norström: Jessica, Alex Norström here. I see that we are excited about 2027. I am really excited about 2027 as well, but it is going to be premature for me to talk about specificity around next year. I will give you a bit of how Gustav Söderström and I think about the underlying recipe here. Really the work to be done inside Spotify is to add value to our free tier, add value to create a better and better free product. You have seen us do that. About a year ago, we launched the new Spotify free tier, which is the best free tier out there, and that has kept yielding results over the past 12- 18 months. The other thing we do is, of course, to enrich our Premium tier. To your point, I cannot really remember a time in Spotify's history where we have added so much value back to the Premium tier like this current year here. Then we create products on top of that for the niche audiences and the power law like we have talked about. Then the third step in this is really just to figure out how to monetize all of this value that we add, whether that be by way of advertising sales or price increases, add-ons, more subscriptions, and better engagement across more days of the month. This is really a simple but very powerful recipe that we have followed and deployed for many years now. Bryan Goldberg: Our next question is going to come from Eric Sheridan. This time on the ads business. With respect to ads, can you discuss how the third quarter results track relative to your expectations for a second half 2026 growth inflection? Is there any color on the underlying drivers of advertising performance embedded in your overall Q4 revenue commentary? Alex Norström: They are tracking really well against our expectations. We have talked about this before. We have been hard at work for some time now in rebuilding the underlying stack and foundation for advertising sales business at Spotify. I will tell you this, there are a lot of things that have been changing, but there are these three things that have not changed, and they remain why advertisers are interested in coming to Spotify. One is that we have a beloved brand. Second of all, we have high-quality content. It is licensed content, and we also have high-quality engagement. It is not just about the hours, it is also about the moments of the day and the context you are in, and as many days in a month as possible. We have talked about that before. So these remain the reason for why our special corner of the internet is still very interesting for advertisers to associate themselves with. What then is our job internally? Well, it is in light of this, to just make it easier and easier for advertisers to buy this special inventory, whether that be by making for easier automated attachment to Spotify or whether that be creating better measurement, or whether that is to broaden the demand for audio specifically, whether it is making easier for folks out there to create audio ads and so on. All of these are things that is underway. We have done a lot of work already. But this will just continue to improve and this is what is powering the Q4 guidance. Bryan Goldberg: Okay, got another question from Eric Sheridan. This time on investments. Can you discuss how investors should think about the forward trajectory of growth investments, especially across AI and cloud, when measured against the potential for scaling AI-led experiences and products on the user side in the coming quarters? Gustav Söderström: Yeah, thanks, Eric. This is Gustav. I will talk about this from a few different lenses. There is obviously productivity within the organization, then there is cost on the consumer experience. First of all, Alex and Christian and I, we said early this year that we were going to invest a little bit ahead because we saw a lot of opportunity. One question that you didn't ask, but I'm going to answer anyway, is what did we get for the investment? First of all, we also said that these investments and these costs were going to start moderating in Q4, which they are. As Alex said in his opening remark, this is a quarter of doing what we said we were going to do. So, they're moderating in Q4 and into next year, just as we said. But it's still valid to ask what we got. Well, we got a lot of investments in platform that excites us. I've spoken at length about the large taste model. But I also wanted to talk a little bit about the results of the large taste model that we're now seeing already. So we're seeing double-digit growth in discoveries, which is one of the leading metrics for how exciting you think Spotify is. I think it surprises no one, but if you never find any new music, eventually you're going to get less excited about this product. So that is a very important metric to us. I also want to say, it's very early, we're just rolling this out, but it is already on track to add billions of listening hours per year. And my experience with these things is you get a lot of incremental improvement as you start iterating on these things. So I'm very excited about what we're seeing because this was a large investment. This also goes to the earlier question of the value we're creating in a world of agents, where you interact with Spotify through other agents. This is the value. So we're seeing exactly what we want to see. But more than that, we also invested in a lot of AI features. I talked at length about user control, interactivity, being able to ask for what you actually wanted, and this idea that what LLMs allow you to do is to finally talk to Spotify in English. One question could be, is anyone talking to Spotify? The answer is yes. There are now tens of millions of people speaking to Spotify in English, which I think is remarkable. That doesn't really happen on any other media service yet. We are very excited about the adoption that we are seeing of these features. Another favorite I mentioned in my opening remarks is Mixing Tools, which is scaling like crazy. We are feeling very good about the return of this investment. I want to reiterate, we said that the costs were going to moderate, and they are moderating now in Q4 and into 2027. I think that covers roughly how you should think about it. I just want to comment also on the productivity side of our engineering. Not only have you seen large cost cuts from the labs in terms of token costs, et cetera, that are obviously very helpful for us, but we have been investing ourselves in these platforms that you heard about, SERP, et cetera, where we can route between agents, including open-source models. We have done a lot of investment in controlling our own costs. Now we are seeing two things I am very excited about. We have very clear cost controls, where we can route to the models that we want. We are also finally seeing the next level of productivity. I think many companies have said that they see 100% growth in lines of code, PRs, et cetera, and so have we. There is a question like, does that actually translate into end user features? Now as we have gone through, we have six months development cycles, we are seeing significant acceleration in end user products that are shipping, what we call DoDs, definitions of done, things that are merged and shipped to end users. We are shipping much more. The last part of that question is, well, does that translate into actual value? I just told you that it does. We see engagement, retention, active days going up, not just across products like audiobooks, but also across discoveries, saves, listening hours, et cetera. I feel very good about where we are right now. As Christian Luiga always asks me to say, and always says, we are going to keep being diligent with our cost, as you have seen us be for the several last years. You will also see us take these opportunities when we see them. Bryan Goldberg: All right. We have got another question here, this time from Rich Greenfield on the advertising business. While ads growth recovered as you expected, is there a realistic path where advertising actually lifts Spotify's overall revenue growth rate? Could that be a 2027 event? Christian Luiga: Thank you, Richard. Christian here. As you say, we are recovering as expected. As we said for a long time, we will move towards double-digit growth in the second half of 2026. In Q4, we are also continuing to do our progress towards double-digit growth. This is driven by biddable, which is now up to 40%, and also podcasts, as Alex Norström alluded to before. Going into 2027 and going into path, a journey in the future where we are in double-digit growth, of course that is important. Even if ad support is only 10% of the revenue today, it's much better to have 10% revenue growth or above than having a low single-digit growth. That will, of course, drive the revenue growth from the total. Bryan Goldberg: Okay. We've got another question from Sean Diffley, this one on our in-house tech. You recently started selling your own internal software tools to other companies as you are becoming an R&D operating system. Can you please discuss the rationale here and how big of an opportunity this can be? Gustav Söderström: Yeah. I think the way to think about this right now is mostly as option value. The reason we're doing this is because, as we just talked about, we invested quite a bit to be able to be at the very forefront of agentic development. What happened is, not surprisingly, a lot of other companies asked us about that and said, "We would also like to use this technology." Because we've taken these costs anyway, we could choose to just amortize them over our few thousand developers, or we could choose to amortize them over more developers. That's how we're thinking about it. We're taking these costs anyway to stay at the forefront. This is a way for us to amortize those costs more efficiently. That's how we're thinking about it right now. I'm not going to give any more guidance on this right now. Think about it as option value for the time being. Bryan Goldberg: Okay. Our next question is going to come from Jason Bazinet on the Family Plan. It was recently reported that you are beginning to crack down on Family Plan subscribers that do not live in the same home. What markets are you pursuing this enforcement? How long before the implementation is complete? What financial impact do you expect from this? Alex Norström: Jason, this is not as much a crackdown as it is actually a routine improvement of our verification methods for our Family Plan. Family Plan has existed for a long while. It has been around for, I think it is now close to 12, 13 years in Spotify history, and it makes up a pretty significant proportion of our subscriber base. As such, it is important for us to just make sure over time that we improve the verification methods that we have. There are certainly ways, over time, to find holes around it. As that happens, we figure out how to improve it over time. This is not something that has an end date. This is not an implementation that is going to complete. This is just ongoing routine. Bryan Goldberg: Okay. Our next question is going to come from Justin Patterson on AI investment. Now that you have had nearly one year of deploying new tools like Claude Code, could you talk about your view on AI ROI and how that has evolved and shaped your thought on investment levels? Gustav Söderström: Thanks, Justin. This is Gustav. I think I already mentioned this. We saw the typical early productivity metrics of lines of code, pull requests, et cetera, that I think everyone is seeing. I do not think everyone is yet seeing the true heart of productivity metrics. We are, as we have now had about two cycles. With cycles, I mean six-month development cycles, because we roughly plan in six-month increments. Then we measure. We decide what we are going to do for six months, then we build it, and then we can measure how much of that we delivered. We are seeing very significant acceleration in the last six-month cycle in actually building and shipping end-user features. I feel very good about that AI ROI. Obviously, as I said, the next step is to figure out, sure, it is great shipping features, but is anyone using them? Are they producing engagement, retention, and revenue? As I said before, it's actually all of the above. We have adoptions, producing engagement, increases retention, but it is also, in the case of audiobooks, driving direct ARPU. We feel very good about what we're seeing right now, which is why you should expect us to remain at these investment levels. As I said before, hopefully by now it's becoming clear that we're pretty diligent about these opportunities. We try to understand what the business case is. You're going to see us roughly at the same levels. We're going to take these opportunities when we see them, and we're going to communicate them the way we have. Bryan Goldberg: Okay. We've got another question from Jason Bazinet, this time on capital allocation. You've got no debt, nearly EUR 10 billion of cash and cash equivalents. How do you expect to use this cash to create shareholder value? Christian Luiga: Jason, Christian here. Thanks for the question again. I will just go back a little bit to what we said before. Having a strong balance sheet gives us strategic optionality and flexibility to create shareholder return. We have said that we will do that by investing in our organic journey, but also inorganic journey. On top of that, as we've been very clear, we think that with this high number of cash pile that we have on top of the cash flow compounding over time, that we will start to return cash to shareholders of the excess cash. That's what we have started doing in quarter 1. There's no news on that, and I think it's a quite clear message, and we work very opportunistically in how we invest. Bryan Goldberg: Okay. Our next question's going to come from Justin Patterson, this time on Studio. While agents and assistants do not seem disruptive to your business, it does seem like something that could encroach upon emerging products like Studio by Spotify, which builds custom podcasts and has assistant-like capabilities. How do you believe the opportunity for this product has changed? Gustav Söderström: Yeah. I think the way to think about Studio is back to anticipation. We anticipated that these kind of agents were going to happen, so we built the ability to use Spotify agentically in our desktop client for the hardcore frontier users. We learn a lot. This is why we have these features, like creating podcasts. Then we also built skills for them so that third-party agents could also create them. As I explained before, it is very valuable when someone creates Spotify content through these third-party agents using their personal context about their life. That just makes Spotify more valuable. We think this is definitely a tailwind for us. You will still be able to create these things inside Spotify as well. I think, again, the best analogy is our ubiquity strategy that has been very successful for us in the age of connected speakers and devices, where we built this layer where you can use Spotify from any third-party interface, but using Connect, we can still control and understand the playback. That is the way to think about this as well. It is Connect for the agentic age. I think the opportunity is very large for us. I think personalized content is clearly happening, and that's why we invested towards it early. Bryan Goldberg: Okay, we've got a question now from Douglas Anmuth on our audiobooks expansion. How should we think about the margin impact of expanding audiobooks from 22 markets to more than 180 by year-end? Can you see similar positive benefits as you did in the early launches? Alex Norström: We certainly see similar positive benefits, which is why we've decided to go broad and basically have the first global audiobooks business. I want to take you back also a little bit to how this started. One very powerful way to detect really what the desirability is of the different types of content is to just follow your user's lead. This is now almost three years ago when Gustav and I saw the uptake of audiobooks in Germany popping just as a, really as an accident. Someone uploaded some audiobooks onto our service and really saw that users were captured by this type of content. So we started this little project between Gustav and I and a small crack team. We worked at it. We saw that there was tremendous opportunity and that we could make a difference. We could certainly be helpful in bringing more book listeners to the world. We decided to set a sail. Now we are three years later, and we have had a good three years of real positive benefits. We have increased our audiobooks listenership by 40%. This is even before launching to the rest of the world. We have seen listening hours grow as well. The way you think about the impact is really that we have increased the number of days that people are active on Spotify, which ultimately drives retention and also lifetime value. We have also seen early but very strong indications on add-ons for this type of category really working out. That taken together, this is great for our users, and this is great for Spotify, and we are super excited about the launch that we are doing right now. As far as margin goes, the way to think about that is, we have set targets at Investor Day, and we are marching towards those targets. Bryan Goldberg: Okay. We have got a question from Rich Greenfield on AI agents. As agents like Muse and Instinct take over the interface, they could compare subscription prices, switch services seamlessly, or cancel ones that go unused. If the agent owns the relationship, what keeps Spotify from becoming an interchangeable back-end pipe? Is churn from agents a real risk? Gustav Söderström: Thanks, Richard. An excellent question. I am going to answer in two parts. First, I want to, again, push back a little bit on the, as agents like Muse and Instinct take over the interface. The way to think about it is, Spotify has been integrated into, for example, Google Maps and Waze for decades. We have not talked about it because I did not want competition to understand, but it has been fantastic for us. People have been using Spotify through Google Maps and Waze during their commute for years. That has been tremendous growth for us because Spotify and its business model works in the background. That was not negative for us. We did not get commoditized. We actually grew tremendously. That is the way to think about this as well. Spotify being integrated is a growth vector for us. As long as we feel comfortable about our differentiation in terms of data and experience, which I've talked at length about, which we feel very comfortable about. Yes, these things are an interface in front of us, but that's been true for some time, and we think it's a good thing. It's driving growth for us. On the second part of the question, which I think is excellent. The first thing that Muse as an agent asks you as a user is often like, "Hey, want me to go through your email and try to help you find subscription that you're not using?" The important part of that is the last sentence, "That you're not using." The good thing for Spotify is we will never bet on you forgetting about your subscription. We will never bet on breakage or trying to trick you. In fact, I think Alex Norström has talked about this. We have over 100 million users that use Spotify 28 days of the month. We're one of the most highly engaging services in the world. When we ask our users, we're not interested in breakage either. When we ask our users how many of them subscribe to Spotify without realizing it? It's basically no one. We think we are one of the best-positioned services in the world for this age. I actually think this will be helpful for us. It's a bold bet, but I think on that list of things that you unsubscribe from, Spotify is going to be the last thing that you unsubscribe from. We know this from previously. We've been around for 20 years. We've gone through financial crisis, et cetera. We're one of the most resilient subscriptions that exist. It is because we never bet on you forgetting about your subscription. I think the other thing, the opposite could also be true. I think these agents are going to help you subscribe to the best music service, to the best podcast service, and help you understand that Spotify is actually a better deal. Bryan Goldberg: All right. We've got time for about two more questions. The next one's going to come from Batya Levi on new product. "How has demand been for the new features you've launched this year, Taste Profile, Prompted Playlist, et cetera? As the product delivers more value, how do you balance raising prices against growing the subscriber base? Alex Norström: Thanks for the question, Batya. We've used the concept of value to price ratio and also the value stick many times. I'll remind you of this one because this is really how we think about launching product, adding value, and then how to price it. It really comes down to us figuring out how the subscriber is going to win, meaning to get an improved value to price ratio over time. In the first 15 years of Spotify, we had a lot of investment in just value, better product, better content experience. It's just better everything all the time, every year. As we sort of grew and got scale, then we started engaging in price increases, which helped us monetize and reinvest that monetization back into the product for more value. That's the journey we're on. As you can see us launching more product, adding more content verticals onto the platform, it's just simply us wanting to add more value to subscribers and users so that they can win when it comes to value to price ratio over time. That's really how we balance raising price against a growing subscriber base. Gustav Söderström: Just to fill in there, I think I covered already the demand. We're very excited about the demand that we see for these AI-based features. We talked about SongDNA, but also features like About the Song is also on its way to 100 million users with tens of millions of people talking to Spotify, several tens of millions of people listening to these agentic sets. So, we feel quite good about the demand for them. Bryan Goldberg: All right. Our last question today is going to come from Michael Morris on music industry partnerships. "The Universal Music Group and Warner Music Group agreements reached their two-year mark in the first quarter of 2027. How do your 2027 pricing plans and the add-on tiers factor into renewal talks on core streaming terms? Do you expect the renewed agreements to be structured like your current deals? Alex Norström: Of course, we don't speak to the specific of agreements with our partners. But I can say this is a reoccurring two-year rhythm that we've more or less had forever in Spotify's lifetime. And to your point, now we're coming up on another one. And we're excited. We're working with our partners and relationship is just improving. And it's improving primarily because our interests are aligned. So, when our interests are aligned and growing even more aligned, then that makes it easier for us to create win-win situations. Bryan Goldberg: All right, great. So, we've reached the end of today's Q&A session, and I want to turn the call back over to Alex Norström for some concluding remarks. Alex Norström: Thank you, Bryan. To close us out, we are building a durable business at scale with a tremendous amount of opportunity ahead. As I said at the top of the call, this quarter, we did what we said we would, and that's how we'll keep running the business. Thank you all for joining us. Bryan Goldberg: All right. Thank you everyone for joining and for your interest in Spotify. A replay of today's call will be available on our website and also on the Spotify app under Spotify Earnings Call Replays. We look forward to speaking with you all soon. Operator: This concludes today's conference call. 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. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool has a disclosure policy. Spotify (SPOT) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool