Spotify Technology SA Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Spotify's Q3 2025 earnings call highlighted strong user growth, surpassing 700 million monthly active users, and revenue exceeding expectations. Management emphasized a focus on long-term value creation through product innovation and strategic partnerships. The call also addressed the leadership transition, with Alex Norstrom and Gustav Söderström stepping into Co-CEO roles. Discussions covered growth opportunities in music, podcasts, and audiobooks, as well as strategies for advertising and monetization.
Key Financial Results
Total revenue was €4.3 billion, up 12% year-on-year on a constant currency basis.
Premium revenue increased 13% year-on-year on a constant currency basis, driven by subscriber growth.
Gross margin reached 31.6%, exceeding guidance by 50 basis points.
Operating income was €582 million, €97 million above forecast.
Free cash flow for the quarter was €806 million.
Business Segment Results
Music: Continued to help artists reach global audiences, with multiple streaming records broken.
Podcasts: Video podcasts saw significant growth, with over 390 million users streaming them, a 54% year-over-year increase.
Audiobooks: Introduced to tens of millions of new, younger listeners, with the catalog more than tripled in English language markets.
Capital Allocation
Repurchased $77 million in shares during the quarter.
Year-to-date share repurchases totaled $410 million through November 3.
Focus is on opportunistically buying back shares to offset dilution from employee equity programs.
Industry Trends and Dynamics
The company is reshaping the audiobook category, fueling growth and discovery across the publishing world.
The global rollout of the enhanced free experience was a key contributor, bringing millions of new listeners into the Spotify ecosystem.
AI is expected to improve recommendations and personalization.
Competitive Landscape
Continued to take market share even in the most competitive markets.
The enhanced free tier is now a much more competitive offering.
The company is well ahead of all other subscription-based audio services in the US for in-car listening.
Macroeconomic Environment
The company is seeing steady retention rates following the rollout of recent price increases across more than 150 markets.
Price increases are part of the company's strategy and will continue to be implemented thoughtfully based on various factors.
The company takes into consideration a number of different factors when adjusting prices in markets, such as household income, maturity of the market, and specific value to price ratio.
Growth Opportunities and Strategies
Multi-format strategy across music, podcasts, video, and audiobooks is working as hoped.
Expanding ubiquity strategy by integrating with platforms like Meta Ray-Bans and ChatGPT.
The company is building products that create new revenue streams for the industry.
The company is focused on personalization, interactivity, and ubiquity.
The company is expanding its ecosystem, building new fans, and serving up just wider distribution channels through partnerships.
Financial Guidance and Outlook
Q4 2025 MAU forecast: 745 million.
Q4 2025 subscriber forecast: 289 million.
Q4 2025 revenue forecast: €4.5 billion, representing approximately 13% year-on-year growth.
Q4 2025 gross margin expectation: 32.9%.
Q4 2025 operating income forecast: €620 million.
The company expects 2026 to be another year of healthy revenue growth, disciplined reinvestments, and margin and cash flow improvement.
