Spotify Technology S.A. Earnings - Q4 2025 Analysis & Highlights
Spotify Technology SA reported strong Q4 2025 results with accelerated revenue growth, record user additions, and significant margin expansion, while positioning itself as a leader in AI-driven audio and media innovation with ambitious plans for 2026 focused on raising ambition across product, technology, and creator partnerships.
Key Financial Results
Total revenue grew 13% year-over-year to €4.5 billion in Q4 2025, with an accelerated growth rate compared to 13% in the prior quarter.
Premium revenue rose 14% versus 13% in the prior quarter, primarily driven by subscriber growth.
Advertising business grew 4% in Q4, flat compared to the prior quarter, though on a like-for-like basis excluding podcast optimization strategies, advertising grew approximately 7%.
Gross margin expanded to 33.1%, up just over 80 basis points year-over-year, primarily driven by content cost favorability.
Operating income reached €701 million in Q4, exceeding forecasts by €81 million, with €67 million of positive impact from social charges due to share price movements.
Free cash flow was €834 million in Q4 2025, and the company ended the quarter with €9.5 billion in cash and short-term investments.
Full year 2025 revenue grew 13%, gross profit grew 20%, and operating income grew in excess of 50% to deliver a full year operating margin of 13%.
Free cash flow generation improved by approximately €600 million to a record €2.9 billion in 2025.
Monthly Active Users (MAU) reached record levels with 38 million net additions in Q4, marking the highest quarter ever for MAU net additions.
Business Segment Results
Music streaming remains the core business, with Spotify paying out more than $11 billion to music rights holders in 2025, setting a global record for the highest annual payment from a single source and bringing the total to nearly $70 billion since founding.
Podcasting segment showed strong growth, with video podcast consumption increasing by more than 90% since the launch of the Spotify Partner Program, and more than 530,000 video podcast shows now on the platform.
Audiobooks expanded to additional markets, with leading global publishers crediting Spotify with bringing in new listeners and driving double-digit growth in audiobooks.
Audiobooks catalog more than tripled to over 0.5 million titles in just two years and expanded into 14 global markets.
Capital Allocation
Share repurchases totaled $433 million in Q4 2025 and the company will continue to opportunistically return capital via share buybacks.
Full year 2025 share buybacks totaled €510 million.
The company has a €1.5 billion convertible note falling due in March which will be settled in cash.
Primary capital allocation focus is reinvestment in the business to drive growth, with share buybacks used to cover dilution.
Industry Trends and Dynamics
Spotify serves over three-quarters of a billion people around the world, demonstrating the massive scale of the audio and media consumption market.
Wrapped campaign achieved record-breaking engagement, with more than 300 million users engaged (up 20%) and more than 630 million shares across social media (up 42%).
Day one of Wrapped marked the highest single day of subscriber intake in Spotify history.
Interactive DJ has been used by approximately 90 million subscribers, driving over 4 billion hours of time spent on Spotify.
Mixing tools reached a milestone of 50 million mixed playlists, with listeners making more than 1 million transactions per day.
Monthly streaming hours per user in the US have grown more than 20% in the last five years.
Spotify works across more than 2,000 devices from over 200 brands, demonstrating ubiquitous platform presence.
Competitive Landscape
Spotify maintains the largest reach and monetization opportunities for music, positioning it as the destination where music charts and finds an audience.
The company has the right business model for the AI era, with subscription and advertising models that align with how AI companies are structured.
Spotify is leading the market with interactive, natural language-based services among media platforms.
Management stated that rights holders and the entire music industry are lined up behind Spotify's vision for AI-generated music and derivatives.
Spotify is positioned as the world's first truly intelligent agentic media platform that users can talk to, contrasting with most media services today.
Macroeconomic Environment
Currency headwinds are impacting results, with unfavorable currency movements resulting in an incremental €35 million headwind in Q1 guidance compared to prior quarter exchange rates.
Management expects progression towards a normalized long-term tax rate in 2026.
Growth Opportunities and Strategies
AI and agentic experiences represent a major growth opportunity, with Spotify having invested in AI voice platform Sonantic in 2022 to introduce agentic experiences to users.
Prompted Playlist launched as a new tool allowing users to describe and set rules for personalized playlists, integrating listening history and up-to-the-minute culture from the internet.
The company launched more than 50 new features and innovations in 2025, including Prompted Playlist, Page Match, and About the Song.
AI-generated music presents opportunities in two categories: net new music creation and derivatives of existing music, with Spotify positioned to benefit from growing catalog and new revenue streams for artists.
Spotify is developing artist-first AI products in partnership with major labels to unlock monetization opportunities from existing catalog through AI.
The company is building a unique language-to-music, language-to-podcast, and language-to-books dataset that no other platform is building at scale.
Agentic coding is accelerating product velocity, with engineers able to generate code and supervise it rather than writing code manually, using a system called Honk.
Books expansion includes physical book sales through partnership with Bookshop, addressing consumer demand for seamless access across audiobooks, e-books, and physical formats.
The company is framing 2026 as the "year of raising ambition" with plans to share more details at an Investor Day in May.
Financial Guidance and Outlook
Q1 2026 MAU guidance is 759 million, an increase of 8 million from Q4 2025.
Q1 2026 Premium subscriber guidance is 293 million, implying net additions of 3 million, which is within historical range for Q1.
Q1 2026 total revenue is forecasted at €4.5 billion, representing an improved growth rate of approximately 15% versus the 13% delivered in Q4.
Q1 2026 ARPU growth is forecasted in the 5% to 6% range.
Q1 2026 gross margin is expected at 32.8% and operating income of €660 million.
Gross margin and operating margin are expected to improve in 2026, with pricing adjustments expected to help drive revenue growth that outpaces net content cost growth.
Free cash flow generation is expected to meaningfully exceed 2025 levels while reflecting progression towards a normalized long-term tax rate.
The company expects continued healthy MAU and Premium subscriber growth throughout 2026 while maintaining consistently low churn.
Advertising growth is expected to improve in the second half of 2026, with the company encouraged by progress in market adoption of new advertising tools.
Churn related to recent price increases is in line with expectations, and the company is well-positioned for conversion and continued healthy subscriber growth in 2026.
Product Innovation and Technology
Spotify is investing heavily in AI and machine learning capabilities to enhance personalization and create agentic experiences.
The company acquired Echo Nest in 2014 to gain machine learning and AI capabilities that are now core to everything Spotify does.
Spotify Connect, launched in 2011, enables the platform to work across more than 2,000 devices from over 200 brands, demonstrating a long-term commitment to ubiquity over control.
The company is building systems and infrastructure to support agentic coding and AI-driven product development at scale.
Creator and Artist Partnerships
Spotify paid out more than $11 billion to music rights holders in 2025, demonstrating commitment to creator compensation.
The company is working with the industry to develop artist-first AI products that allow artists to monetize existing catalog through AI-generated derivatives.
Management emphasized commitment to supporting artists, not working around them, in developing new AI-related opportunities.
Spotify for Artists and other creator tools help artists reach listeners they would not find otherwise.
