Spotify (SPOT) AI Stock Analysis

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Spotify

(NYSE:SPOT)

Rating:66Neutral

Price Target:

$677.00

▲(7.95%Upside)

Spotify's solid financial performance and robust user growth are offset by technical weakness and high valuation. While earnings call reveals strong strategic initiatives, currency and advertising challenges present risks.

Positive Factors

Long-term Strategy

There is confidence in the path to 40%+ long-term gross margins driven by high-margin non-music content verticals and superfan tiering.

Monetization Opportunities

Spotify has the opportunity to expand its services and monetize further through complementary services and enhanced advertising capabilities.

User Growth

Spotify nicely beat consensus expectations for 2Q MAU growth, indicating strong user engagement and platform growth.

Negative Factors

Advertising Revenue

Advertising revenue has been a disappointment, though it's only a small portion of total revenue, with expectations for eventual improvement.

Earnings Guidance

Spotify reported lackluster 2Q:25 results, issued a disappointing 3Q:25 outlook, and increased its share repurchase program by $1 billion.

Financial Performance

Reported Q2:25 GAAP revenue of €4.19B was below our €4.31B estimate and consensus/guidance of €4.26B and €4.30B, respectively.

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

Market Cap

$127.13B

Dividend YieldN/A

Average Volume (3M)2.26M

Price to Earnings (P/E)148.0

Beta (1Y)1.01

Revenue Growth15.52%

EPS Growth67.15%

CountryUS

Employees7,258

SectorCommunication Services

Sector Strength78

IndustryInternet Content & Information

Share Statistics

EPS (TTM)-0.48

Shares Outstanding205,777,760

10 Day Avg. Volume3,439,125

30 Day Avg. Volume2,257,865

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)0.00

Price to Sales (P/S)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.18

Enterprise Value/Revenue9.07

Enterprise Value/Gross Profit28.67

Enterprise Value/Ebitda106.08

Forecast

1Y Price Target

$766.46

Price Target Upside22.21% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering25

Spotify Business Overview & Revenue Model

Company DescriptionSpotify Technology S.A. is a leading audio streaming service provider, offering users access to a vast library of music, podcasts, and other audio content. The company operates in the technology and entertainment sectors, delivering an intuitive platform available across various devices, including smartphones, tablets, and desktops. Spotify aims to provide a personalized listening experience through its data-driven algorithms and curated playlists, catering to a diverse global audience.

How the Company Makes MoneySpotify makes money primarily through two revenue streams: Premium Subscriptions and Ad-Supported Services. The Premium Subscription model allows users to access ad-free content, offline listening, and enhanced audio quality for a monthly fee. This subscription service is a significant source of revenue, contributing to a large portion of the company's earnings. The Ad-Supported Service, on the other hand, provides free access to audio content with periodic advertisements. Spotify generates revenue from advertisers who pay to reach its extensive user base through audio, video, and display ads. Additionally, Spotify has strategic partnerships with various device manufacturers and telecommunications companies, which help expand its reach and user base, further enhancing its revenue potential.

Spotify Key Performance Indicators (KPIs)

Any

Users

Users
Tracks the number of active users, indicating Spotify’s reach, market penetration, and potential for future growth.

Chart InsightsSpotify's user growth continues to be robust, with a notable increase in both ad-supported and premium subscribers. The recent earnings call highlights strong subscriber additions, particularly in emerging markets, contributing to a 15% revenue growth. Despite challenges in the advertising segment, Spotify's strategic focus on innovation and AI-driven features is enhancing user engagement and operational efficiency. The company's guidance suggests continued momentum, projecting further growth in users and revenue, although currency headwinds and social charges pose potential risks to profitability.

Data provided by:

Main Street Data

Spotify Earnings Call Summary

Earnings Call Date:Jul 29, 2025

(Q2-2025)

% Change Since: -10.53%|

Next Earnings Date:Oct 28, 2025

Earnings Call Sentiment Neutral

The earnings call reflected strong user and subscriber growth, significant engagement improvements, and successful content expansion, particularly in video. However, challenges in the advertising business and unexpected operating income miss due to social charges and currency impacts presented notable concerns.

Q2-2025 Updates

Positive Updates

Record Subscriber Growth

Spotify's subscriber growth exceeded expectations, with 8 million net subscribers added, bringing the total to 276 million, up 12% year-on-year and 3 million ahead of guidance.

User Engagement Strength

User engagement continues to improve, with 696 million MAU, exceeding guidance by 7 million. This reflects the success of content expansion and product enhancements.

Video Content Growth

Video podcasts are growing 20x faster than audio-only consumption, with 350 million users streaming video podcasts, a 65% increase year-over-year.

Positive Gross Margin Expansion

Gross margin expanded by approximately 230 basis points year-on-year, driven by premium revenue growth and improved advertising margins.

Expansion of AI and Personalization

Spotify has significantly improved user engagement with AI-driven features like DJ and AI playlists, leading to a nearly 45% increase in DJ streams globally.

Negative Updates

Struggles in Advertising Business

Spotify's advertising business underperformed expectations, with a currency-neutral growth of only 5% year-on-year, and challenges in execution cited.

Operating Income Miss

Operating income was EUR 133 million below guidance, primarily due to unexpected social charges and lighter ad sales contributions.

Currency Impact on Revenue

Currency movements negatively impacted reported revenue by EUR 104 million relative to guidance and are expected to be a headwind in Q3 as well.

Company Guidance

During Spotify's second quarter 2025 earnings call, the company reported notable metrics and guidance for future growth. The quarter saw a substantial increase in user growth, with subscribers increasing by more than 30% compared to the first half of 2024, and the company achieving over 100 million subscribers in Europe. Spotify's monthly active users (MAU) reached 696 million, exceeding guidance by 7 million, and subscriber count grew to 276 million, surpassing expectations by 3 million. Despite the robust growth in user engagement, Spotify's advertising business underperformed, with a currency-neutral growth of only 5% year-over-year, prompting a strategic recalibration to accelerate its contribution. Gross margin stood at 31.5%, aligning with guidance, and operating income, although below guidance by EUR 133 million, was influenced by unforeseen social charges. Looking ahead, Spotify anticipates a slight underperformance in Q3 compared to expectations, but remains optimistic about reaching 710 million MAU and 281 million subscribers, while maintaining a stable EUR 4.2 billion revenue forecast, despite currency headwinds. The company reaffirmed its commitment to long-term strategic initiatives, emphasizing lifetime value over short-term gains, and highlighted plans for capital allocation including a $2 billion share repurchase authorization.

Spotify Financial Statement Overview

Summary

Spotify's financial performance is robust, characterized by consistent revenue growth, improved profitability margins, and strong cash flow generation. The company's balance sheet reflects stability with controlled leverage and effective equity utilization. Overall, Spotify is well-positioned in the industry with a healthy financial trajectory.

Income Statement

Very Positive

Spotify has demonstrated strong revenue growth with a notable increase from $15.67 billion in 2024 to $16.23 billion in TTM (Trailing-Twelve-Months), reflecting a 3.56% growth rate. The gross profit margin in TTM stands at 30.98%, indicating solid cost management. The net profit margin has improved to 7.19%, reflecting enhanced profitability. EBIT and EBITDA margins are also strong at 10.51% and 9.99% respectively, showcasing effective operational efficiency.

Balance Sheet

Positive

Spotify exhibits a stable balance sheet with a debt-to-equity ratio of 0.34, indicating manageable leverage levels. The return on equity (ROE) is 18.67%, demonstrating effective use of equity to generate profits. The equity ratio is 49.24%, suggesting a balanced capital structure with a good portion of assets financed by equity.

Cash Flow

Positive

The company shows strong cash flow management with a free cash flow growth rate of 14.84% from 2024 to TTM. The operating cash flow to net income ratio is 2.27, and the free cash flow to net income ratio is 2.25, indicating efficient conversion of income into cash and strong liquidity.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	16.61B	15.67B	13.25B	11.73B	9.67B	7.88B
Gross Profit	5.25B	4.74B	3.40B	2.93B	2.59B	2.02B
EBITDA	1.42B	1.50B	-298.00M	-284.00M	467.00M	-293.00M
Net Income	806.00M	1.14B	-532.00M	-430.00M	-34.00M	-581.00M
Balance Sheet
Total Assets	13.46B	12.01B	8.35B	7.64B	7.17B	6.33B
Cash, Cash Equivalents and Short-Term Investments	8.34B	7.45B	3.97B	3.35B	3.50B	1.75B
Total Debt	2.38B	2.00B	1.70B	1.68B	1.78B	577.00M
Total Liabilities	6.84B	6.48B	5.82B	5.24B	5.05B	3.52B
Stockholders Equity	6.63B	5.53B	2.52B	2.40B	2.12B	2.81B
Cash Flow
Free Cash Flow	2.82B	2.28B	674.00M	21.00M	276.00M	181.00M
Operating Cash Flow	2.85B	2.30B	680.00M	46.00M	361.00M	259.00M
Investing Cash Flow	-2.00B	-1.49B	-217.00M	-423.00M	-187.00M	-372.00M
Financing Cash Flow	480.00M	729.00M	234.00M	-40.00M	1.25B	285.00M

Spotify Technical Analysis

Technical Analysis Sentiment

Negative

Last Price627.15

Price Trends

50DMA

697.75

Negative

100DMA

643.50

Negative

200DMA

566.71

Positive

Market Momentum

MACD

-18.67

Positive

RSI

37.10

Neutral

STOCH

18.90

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPOT, the sentiment is Negative. The current price of 627.15 is below the 20-day moving average (MA) of 690.28, below the 50-day MA of 697.75, and above the 200-day MA of 566.71, indicating a neutral trend. The MACD of -18.67 indicates Positive momentum. The RSI at 37.10 is Neutral, neither overbought nor oversold. The STOCH value of 18.90 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GOOGL	84 Outperform	$2.29T	20.14	34.83%	0.43%	13.19%	34.51%
META	83 Outperform	$1.89T	27.16	40.65%	0.27%	19.38%	40.62%
GOOG	82 Outperform	$2.29T	20.23	34.83%	0.43%	13.19%	34.51%
PINS	80 Outperform	$25.55B	13.71	48.41%	―	17.81%	1175.52%
TME	72 Outperform	$28.95B	23.98	14.37%	0.88%	4.59%	83.27%
SPOT	66 Neutral	$127.13B	147.96	13.94%	―	15.52%	67.15%
Sector *	61 Neutral	$41.44B	-3.01	-11.42%	4.05%	2.71%	-44.19%

* Communication Services Sector Average

Performance Comparison

SPOT

Spotify

627.15

303.12

93.55%

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.Date of analysis: Aug 03, 2025