Why Spotify's Latest Results Look Worse Than They Are
On the user side, Spotify added 18 million MAUs in the second quarter, bringing the total to 696 million, above the 689 million guidance. Strong marketing campaigns and favorable competitive dynamics supported this growth across all regions. Premium subscribers rose to 276 million, 8 million net additions, beating the company’s guidance of 273 million.
Revenue for the quarter came in at 4.19 billion euros, up 15% FX-neutral year-over-year, but below both management’s guidance of 4.3 billion euros and JPMorgan’s 4.27 billion euros estimate. FX headwinds were much stronger than expected, around 440bps compared to the 170bps the company had projected. Premium revenue grew 16% FX-neutral, driven by a 12% increase in subscribers and a 3% rise in ARPU. Advertising revenue increased 5% FX-neutral, slightly below the 6% JPMorgan had expected.
Spotify guided for third-quarter MAUs of 710 million and premium subscribers of 281 million, ahead of JPMorgan and consensus estimates. However, revenue guidance of 4.2 billion euros fell short of the 4.5 billion euros estimate, again reflecting significant FX pressure (~490bps) and indicating another ~500bps slowdown in FX-neutral revenue growth.
Spotify expects a third-quarter gross margin of 31.1% and operating income of 485 million euros, below JPMorgan’s forecasts of 31.3% and 524 million euros, respectively. The outlook embeds another 25 million euros of headwind from social charges. Overall, while user growth remains a strength, Anmuth closely watched for improvements in revenue momentum, cost structure, and long-term margin execution.
Goldman Sachs’ Take
Sheridan expects a mixed to slightly negative market reaction to Spotify’s second-quarter 2025 results. The analyst noted that the company reported revenue and operating profit below its prior guidance, while gross margin landed in line with expectations.
He attributed the shortfall to an unfavorable revenue mix, higher-than-expected FX headwinds, and elevated social charges, driven in part by stock price appreciation. Despite these headwinds, Spotify continued to show strong user growth, signaling that external factors had more impact than weak business fundamentals, Sheridan noted.
The analyst noted that this quarter’s results reflect a continuation of Spotify’s 2025 strategy, prioritizing long-term growth investments over margin expansion after a strong margin performance in 2024.
He also highlighted Spotify’s newly authorized $1 billion share buyback, on top of the remaining $896 million from a previous program.
On the earnings call, Sheridan will watch for clarity on pricing strategy, gross margin outlook, and Spotify’s ability to balance growth investments with operating efficiency.
Price Action: SPOT stock is trading lower by 11.6% to $619.96 at last check Tuesday.
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Latest Ratings for SPOT
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Date |
Firm |
Action |
From |
To |
|---|---|---|---|---|
|
Mar 2022 |
Deutsche Bank |
Initiates Coverage On |
Hold | |
|
Feb 2022 |
B of A Securities |
Maintains |
Buy | |
|
Feb 2022 |
Wells Fargo |
Maintains |
Underweight |
View More Analyst Ratings for SPOT
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