Spotify (SPOT) AI Stock Analysis

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Spotify

(NYSE:SPOT)

75Outperform

Spotify's strong financial performance and positive earnings call sentiment are key strengths, highlighted by significant user growth, profitability, and strategic innovations. However, the high P/E ratio raises concerns about valuation, and technical indicators suggest mixed short-term momentum. The company faces challenges in advertising revenue, yet maintains a strong growth outlook.

Positive Factors

Industry Resilience

The music industry's resilience against tariff risks and a consumer slowdown provides a defensible position for Spotify.

Market Performance

Spotify shares have outperformed the market, continuing a pattern of strong growth compared to broader indices.

Subscription Pricing

Spotify's introduction of new premium tier subscription pricing and potential podcast profitability are meaningful catalysts for growth.

Negative Factors

Advertising Growth

Reduced ad growth estimates for Spotify due to a softened ad outlook could negatively affect financial performance.

Competition and Margins

Fierce competition, thin margins, and slowed subscriber growth pose challenges for Spotify's profitability.

Market Volatility

Recent market volatility could impact future advertising growth and put downward pressure on ad budgets.

Spotify (SPOT) vs. S&P 500 (SPY)

Market Cap

$120.01B

Dividend YieldN/A

Average Volume (3M)2.47M

Price to Earnings (P/E)97.8

Beta (1Y)1.02

Revenue Growth18.36%

EPS GrowthN/A

CountryUS

Employees7,691

SectorCommunication Services

Sector Strength88

IndustryInternet Content & Information

Share Statistics

EPS (TTM)6.11

Shares Outstanding203,844,400

10 Day Avg. Volume2,249,086

30 Day Avg. Volume2,467,970

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$661.96

Price Target Upside14.74% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering27

Spotify Business Overview & Revenue Model

Company DescriptionSpotify Technology S.A., together with its subsidiaries, provides audio streaming services worldwide. It operates through Premium and Ad-Supported segments. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers. The Ad-Supported segment provides on-demand online access to its catalog of music and unlimited online access to the catalog of podcasts to its subscribers on their computers, tablets, and compatible mobile devices. The company also offers sales, marketing, contract research and development, and customer support services. As of December 31, 2021, its platform included 406 million monthly active users and 180 million premium subscribers in 184 countries and territories. The company was incorporated in 2006 and is based in Luxembourg, Luxembourg.

How the Company Makes MoneySpotify generates revenue primarily through a freemium model, which includes both subscription fees and advertising revenue. The company's premium subscription service accounts for the majority of its income, offering users an ad-free experience, offline listening, and higher sound quality for a monthly fee. In addition to subscription revenue, Spotify earns money through its ad-supported free tier by selling advertising space to businesses looking to reach Spotify's extensive user base. Key partnerships with record labels, content creators, and technology companies also play a significant role in Spotify's revenue generation, enabling the company to expand its content offerings and improve user experience.

Spotify Key Performance Indicators (KPIs)

Any

Users

Users
Tracks the number of active users on the platform, indicating the service's popularity, market reach, and potential for advertising revenue growth.

Chart InsightsSpotify's user growth has been robust, with ad-supported users driving significant increases, reaching 425 million by the end of 2024. Premium subscribers also grew steadily, totaling 263 million. The latest earnings call highlights record-breaking MAU and subscriber additions, reinforcing strong user engagement, particularly through initiatives like the Wrapped campaign and video podcast expansion. However, challenges in advertising revenue growth and anticipated seasonal weakness in Q1 2025 could impact future momentum. Despite these hurdles, Spotify's strategic focus on new music experiences and disciplined resource management underpins continued confidence in growth.

Data provided by:

Main Street Data

Spotify Financial Statement Overview

Summary

Overall, Spotify has demonstrated strong financial performance, with notable improvements in profitability, efficient cash flow management, and a stable balance sheet. The company shows promising growth prospects with increasing revenue and profitability, while maintaining a low-risk financial structure.

Income Statement

Very Positive

Spotify has shown impressive revenue growth with a Revenue Growth Rate of 18.3% from 2023 to 2024. The Gross Profit Margin improved significantly to 30.1% in 2024, and the company turned profitable with a Net Profit Margin of 7.3%. The EBIT and EBITDA margins also improved remarkably, indicating enhanced operational efficiency.

Balance Sheet

Positive

The company maintains a stable balance sheet with a Debt-to-Equity Ratio of 0.36, reflecting a conservative leverage strategy. The Return on Equity is a robust 20.6% in 2024, indicating effective use of equity capital. However, the Equity Ratio is moderate at 46%, suggesting a balanced financing structure.

Cash Flow

Very Positive

Spotify has achieved strong Free Cash Flow Growth, with Free Cash Flow increasing by 238.9% from 2023 to 2024. The Operating Cash Flow to Net Income Ratio is 2.02, showing solid cash generation relative to net income. The Free Cash Flow to Net Income Ratio is an impressive 2.01, highlighting efficient cash management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
15.67B	13.25B	11.73B	9.67B	7.88B
	Gross Profit
4.72B	3.40B	2.93B	2.59B	2.02B
	EBIT
1.36B	-446.00M	-659.00M	340.00M	-293.00M
	EBITDA
1.50B	-298.00M	-284.00M	467.00M	-293.00M
	Net Income Common Stockholders
1.14B	-532.00M	-430.00M	-34.00M	-581.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
7.45B	3.97B	3.35B	3.50B	1.75B
	Total Assets
12.01B	8.35B	7.64B	7.17B	6.33B
	Total Debt
2.00B	1.70B	1.68B	1.78B	577.00M
	Net Debt
-2.78B	-1.42B	-800.00M	-963.00M	-574.00M
	Total Liabilities
6.48B	5.82B	5.24B	5.05B	3.52B
	Stockholders Equity
5.53B	2.52B	2.40B	2.12B	2.81B
Cash Flow		Free Cash Flow
2.28B	674.00M	21.00M	276.00M	181.00M
	Operating Cash Flow
2.30B	680.00M	46.00M	361.00M	259.00M
	Investing Cash Flow
-1.49B	-217.00M	-423.00M	-187.00M	-372.00M
	Financing Cash Flow
729.00M	234.00M	-40.00M	1.25B	285.00M

Spotify Technical Analysis

Technical Analysis Sentiment

Positive

Last Price576.94

Price Trends

50DMA

574.44

Positive

100DMA

542.53

Positive

200DMA

455.04

Positive

Market Momentum

MACD

8.37

Negative

RSI

50.75

Neutral

STOCH

66.82

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPOT, the sentiment is Positive. The current price of 576.94 is above the 20-day moving average (MA) of 564.20, above the 50-day MA of 574.44, and above the 200-day MA of 455.04, indicating a bullish trend. The MACD of 8.37 indicates Negative momentum. The RSI at 50.75 is Neutral, neither overbought nor oversold. The STOCH value of 66.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SPOT.

Spotify Risk Analysis

Spotify disclosed 56 risk factors in its most recent earnings report. Spotify reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Spotify Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
META	85 Outperform	$1.39T	23.04	37.14%	0.37%	21.94%	61.97%
GOOG	84 Outperform	$1.93T	19.82	34.79%	0.49%	13.02%	37.73%
GOOGL	83 Outperform	$1.97T	17.91	34.79%	0.49%	13.02%	37.73%
TME	77 Outperform	$19.97B	22.45	10.75%	0.99%	0.63%	34.09%
PINS	76 Outperform	$17.71B	9.68	47.49%	―	19.35%	―
SPOT	75 Outperform	$120.01B	97.82	28.91%	―	18.36%	―
Sector *	59 Neutral	$13.74B	6.91	-2.67%	3.82%	2.33%	-34.79%

* Communication Services Sector Average

Performance Comparison

SPOT

Spotify

576.94

296.50

105.73%

Spotify Earnings Call Summary

Earnings Call Date:Apr 29, 2025

(Q1-2025)

% Change Since: -3.48%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong performance in subscriber growth, revenue, and operational efficiency, with significant advancements in podcast monetization and AI-driven innovation. However, challenges in the advertising business, unexpected social charges, and currency headwinds posed some concerns.

Q1-2025 Updates

Positive Updates

Subscriber Growth Outperformance

Spotify reported its highest Q1 subscriber net additions since 2020, primarily driven by emerging markets such as Latin America and Asia Pacific. Developed markets also saw solid growth, indicating a strong global position.

Strong Financial Performance

Total revenue reached $4.2 billion, up 15% year on year on a constant currency basis. Premium revenue rose 16% year on year, driven by continued subscriber growth and ARPU gains from price increases.

Podcast Monetization Success

The Spotify Partner Program enabled over $100 million in payouts to podcast creators in Q1 2025, with users spending 44% more time with video content overall.

Operational Efficiency Gains

Spotify has decreased the time spent rolling out across Ubiquiti apps by ten times and reduced the timing for scaling new features by six times, indicating significant improvements in operational efficiency.

AI and Innovation

AI is being leveraged to enhance product development and efficiency. New AI-driven features like AI Playlists have been rolled out to 40 markets, improving user interaction.

Negative Updates

Advertising Business Challenges

Spotify's advertising business saw only a 5% year-on-year growth, with softness in advertising pricing despite the introduction of new programmatic advertising tools.

Social Charges Impacting Operating Income

Operating income was impacted by €76 million in social charges, which were €58 million higher than forecasted, affecting profitability.

Currency Headwinds

Currency movements have resulted in an incremental headwind of approximately $100 million, impacting revenue outlook for Q2 2025.

Company Guidance

During Spotify Technology S.A.'s Q1 2025 earnings call, the company shared guidance and various metrics highlighting its performance and outlook. The company reported a total of 678 million monthly active users (MAU), an increase of 3 million, and 268 million premium subscribers, up by 5 million or 12% year-over-year. Total revenue reached $4.2 billion, growing 15% year-over-year on a constant currency basis, with premium revenue rising 16% due to continued subscriber growth and average revenue per user (ARPU) gains from price increases. The advertising segment saw a 5% year-over-year growth on a currency-neutral basis. The gross margin was reported at 31.6%, surpassing guidance by approximately 10 basis points and expanding by about 400 basis points year-on-year. Operating income stood at €509 million, while free cash flow was $534 million. Looking forward, Spotify forecasts 689 million MAU and 273 million subscribers for Q2 2025, with an anticipated total revenue of $4.3 billion and a gross margin of 31.5%. The company remains confident in its long-term growth strategy, emphasizing innovation and execution as key drivers for future performance.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.