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    SPOT
    Earnings call· Jun 2026(Q2 FY26)

    Spotify Technology S.A. Q2 FY26 earnings call SPOT

    Aug 4, 2026 Source

    Executive summary

    Spotify Q2 FY26 — Record Gross Margin and Subscriber Growth

    Spotify delivered a strong Q2 FY26, driven by record gross margin and subscriber growth, despite a slight miss on MAU guidance due to strategic product optimizations in emerging markets. The company is leveraging its scale and AI investments to enhance product offerings and drive monetization, with a focus on long-term value creation and sustainable margin expansion. Management remains confident in its ability to achieve its 2030 targets.

    Highlights

    5

    • Revenue grew 15% year-over-year on a constant currency basis, accelerating from 14% in Q1.

    • Gross margin hit a record 33.4%, surpassing guidance by 30 basis points.

    • Subscribers crossed 300 million for the first time, beating guidance by 1 million.

    • Free cash flow strengthened to EUR 797 million, up 14% year-over-year.

    • Active advertisers grew 60% year-over-year to 33,000.

    Concerns

    3

    • MAU net additions of 16 million were 1 million below forecast due to product optimization activities in emerging markets.

    • Ad-supported revenue grew only 3% year-over-year, consistent with Q1, due to expected declines in the direct sales channel.

    • Temporary elevated operating expenses in Q2 and Q3 due to marketing and AI-related investments, totaling EUR 200 million for the full year.

    Guidance & targets

    16
    CategoryTargetConfidence
    MAU
    788 million
    medium materiality
    High
    Subscribers
    305 million
    high materiality
    High
    Total Revenue
    approximately EUR 5 billion
    high materiality
    High
    Total Revenue growth
    14%
    high materiality
    High
    Gross Margin
    32.9%
    high materiality
    High
    Operating Income
    EUR 670 million
    high materiality
    High
    Incremental Operating Expense
    EUR 200 million
    medium materiality
    High
    Employee Headcount
    flat
    low materiality
    High
    Gross Margin
    improve
    high materiality
    High
    Operating Margin
    improve
    high materiality
    High
    Free Cash Flow
    meaningful year-over-year growth
    high materiality
    High
    Ads business growth
    inflect towards double-digit growth
    high materiality
    High
    Revenue CAGR
    mid-teens
    high materiality
    High
    Gross Margin
    35% to 40%
    high materiality
    High
    Operating Margin
    above 20%
    high materiality
    High
    Free Cash Flow
    strong growth
    high materiality
    High

    Operational metrics

    32
    Revenue growth (constant currency)
    15%YoY
    Q2 FY26

    Healthy broad-based growth.

    Gross margin
    33.4%193 bps YoY expansion
    Q2 FY26

    Favorability versus guidance driven primarily by quarterly timing shifts related to growth investments and a small onetime benefit from digital service tax cancellation in Canada.

    MAU (total)
    777 million12% YoY growth
    Q2 FY26

    Continued healthy growth with notable outperformance in Europe and North America.

    MAU net additions
    16 million1 million below forecast
    Q2 FY26

    Due to product optimization activities in emerging markets.

    Subscriber growth
    9%YoY
    Q2 FY26

    Driven by subscriber growth.

    ARPU expansion
    7.4%YoY
    Q2 FY26

    Driven by ARPU expansion.

    Ad-supported revenue growth
    3%YoY
    Q2 FY26

    Consistent with Q1. Strength in automated sales channel offset by expected declines in direct sales channel.

    Automated sales channel revenue contribution
    nearly 40%up from over 30% in Q1
    Q2 FY26

    Continued fast growth.

    Active advertisers
    33,00060% YoY growth
    Q2 FY26

    Increased due to new ways of buying and self-serve options.

    Operating income
    EUR 655 millionEUR 25 million above guidance
    Q2 FY26

    Guidance was EUR 630 million. Excluding non-forecasted social charges favorability, came in EUR 16 million above guidance.

    Operating margin
    13.7%
    Q2 FY26

    Positive operating margin.

    Social charges favorability
    EUR 9 million
    Q2 FY26

    Against forecast, due to share price movements.

    Cash and cash equivalents
    EUR 9.4 billion
    Q2 FY26

    As of close of the quarter, with no debt other than lease liabilities.

    Shares repurchased (YTD)
    $662 million30% increase over 2025 levels
    YTD through August 3, 2026

    Part of capital allocation.

    Shares repurchased (since 2025 resumption)
    2.2 millionapproximately 1% of shares outstanding
    since 2025

    Total shares repurchased since resuming activities in 2025.

    Revenue compounded annual growth rate
    18%
    2022 Investor Day to 2025

    Since last Investor Day in 2022.

    Revenue
    EUR 17 billion
    FY25

    Reached in 2025.

    Gross margin (2022 Investor Day)
    25%
    2022

    Gross margin at the time of the last Investor Day.

    AI-powered experiences adoption
    roughly 1/4
    Q2 FY26

    AI-powered experiences like DJ are used by this many active users.

    Prompted Playlists adoption
    14 million
    Q2 FY26

    Users already using Prompted Playlists out of the first 100 million rolled out to; early retention improvements look promising.

    Audiobooks+ annual recurring revenue
    $100 millionmore than doubled this year
    Q2 FY26

    Add-on has passed this amount in annual recurring revenue.

    Engineers headcount change
    not increased
    last 3 years

    While revenue per employee is on track to double.

    Autoplay minutes growth
    significantly
    first 2 months since deployment

    Powered by the new large taste model.

    Autoplay track sales growth
    significantly
    first 2 months since deployment

    Powered by the new large taste model.

    Autoplay drop-off
    declined
    first 2 months since deployment

    Powered by the new large taste model.

    Chat experiences minutes growth
    double digits
    Q2 FY26

    Driven by the large taste model.

    Jam monthly active users
    almost 50 million
    monthly

    Using Jam to listen together in real time.

    Song DNA users
    more than 100 million
    Q2 FY26

    One of the fastest-adopted features ever shipped.

    Impressions on own ad stack
    99%
    Q2 FY26

    Percentage of all impressions served on Spotify's proprietary ad stack.

    Content streamed
    211 billionvs Netflix's 191 billion
    FY25

    Total hours of content streamed by Spotify users.

    Netflix content streamed
    191 billion
    FY25

    Comparison point for Spotify's content streamed hours.

    Subscribers spending >20 days/month
    over 100 millionincreased again and again
    Q2 FY26

    Active days correlate well with lifetime value for premium subscribers.

    Industry KPIs

    6
    MetricValueDetails
    ARPU arm7.4%%
    Paid members subscribers300 millionsubscribers
    Member quality and retentionover 100 millionsubscribers
    Addressable market penetration4%%
    Share buyback capital returned$662 millionUSD
    Content spend title performance211 billionhours

    Product announcements

    14
    ProductTypeDetails
    Reservedlaunch
    Honk (internal tool)update
    Chirp (internal AI engine)launch
    Talk to Spotifylaunch
    Personal podcastlaunch
    Studio by Spotifylaunch
    Prompted Playlists for Audiobookslaunch
    Autoplay recommendation system (new)update
    Messageslaunch
    Listening activitylaunch
    Listening statsupdate
    Running modelaunch
    Song DNAupdate
    AI audio asset creation toollaunch

    Deals & partnerships

    2
    MerlinAgreement for AI-powered covers and remixes, giving 30,000 labels in Merlin's network the opportunity to participate.

    Follows UMG agreement. Focus on consent, credit, and compensation for artists. Aims to create the first legal way to partake in the AI tailwind for interactive music.

    Live NationReserved ticketing program for premium subscribers.

    Launched in the U.S. in June. Supported multiple tours, nearly 100,000 tickets reserved through Spotify. Live Nation upsized allocations for some tours.

    Risks & headwinds

    4
    Product optimization in emerging markets impacting MAU growthQ3 FY26 (near term impact on MAU)

    MAU net additions of 16 million were 1 million below forecast in Q2; Q3 MAU guidance reflects an increase of 11 million from Q2, lower than previous trends.

    Mitigation: Strategic decision to drive higher user conversion and revenue growth down the line; not expected to affect subscriber growth in the near term.

    Ad-supported revenue growth stabilizationH1 2026

    3% YoY growth in Q2, consistent with Q1, due to expected declines in the direct sales channel.

    Mitigation: Price optimization work complete, direct sales channel stabilizing; migration of ad inventory to in-house ad server complete; expect inflection to double-digit growth in H2 2026.

    Temporary elevated operating expensesQ2 and Q3 FY26 (heavy concentration)

    EUR 200 million incremental operating expense for full year 2026.

    Mitigation: Marketing and AI-related investments are variable and controllable; moderation expected in Q4; headcount flat in 2026, indicating non-structural cost additions.

    AI music tier launch timelineLonger term

    It's a lot of work. It's going to take more time.

    Mitigation: Strong momentum with UMG and Merlin deals; a research preview is expected to gather preference data and improve the model, rather than waiting for a full catalog.

    What to watch in Q3 FY26

    5

    MAU growth in emerging markets

    Q3 FY26 results
    CurrentQ2 MAU net adds 16M (1M below forecast); Q3 MAU guidance 788M (11M increase from Q2)
    TargetStabilization or re-acceleration of MAU growth following product optimizations

    Why it matters

    Indicates the effectiveness of strategic friction introduction in the free tier for long-term monetization without significantly hindering user acquisition.

    As Alex discussed earlier in more detail, this guidance includes product optimization activities in emerging markets while growth rates in developed markets remain stable.

    Q&A highlights

    6

    What products are most exciting in the near term and where will Spotify get the most traction over the next 3-5 years?

    Gustav Söderström highlighted the underlying system built for differentiated monetization. Near-term excitement includes Reserved (100k tickets, unique value), the Large Taste Model (improving active days, retention), SongDNA (100M users), and music videos (new releases perform better). Longer-term, he is excited about the remix/coverage product and 'Talk to Spotify' for interactive experiences.

    “In terms of actual products, I would say right now, the thing that excites me the most is Reserved. It is probably the feature that the most people ever have said, 'This is the best thing you ever did at Spotify.'”

    asked by Jessica Reif Ehrlich · answered by Gustav Söderström

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Product Optimization in Emerging Markets

    Spotify is implementing product optimizations and adjusting ad load in select emerging markets to increase user conversion and revenue growth. This strategy is expected to cause a temporary slowdown in Q3 MAU growth but is not anticipated to impact subscriber growth, aiming for higher monetization over time⏳. The company is carefully introducing friction in both ad load and free tier limitations, positioning these markets for future conversion similar to established regions.

    02

    AI-Driven Innovation and Efficiency

    The company continues to invest heavily in AI, with AI-powered experiences reaching about a quarter of active users. Internal tools like 'Honk' (coding agent) and 'Chirp' (AI engine) are driving engineering efficiency, allowing for cost-effective use of AI models and ensuring vendor agnosticism. The new large taste model, deployed two months ago, has shown promising results in increasing active days, Autoplay minutes, and track sales, while reducing Autoplay drop-off, indicating improved retention and lifetime value.

    03

    Rebuilding the Ads Business

    Spotify's ads business has completed its transition to a new proprietary ad stack, with 99% of impressions now served on this platform. Automated sales channels represent nearly 40% of ad-supported revenue in Q2, up from 30% in Q1, and active advertisers grew 60% year-over-year to 33,000. This shift, combined with self-serve options and AI audio asset creation tools, positions the business for an inflection to double-digit growth in H2 2026, leveraging Spotify's engaged user base and high-quality content.

    04

    New Premium Offerings and Verticals

    Spotify is rigorously exploring new premium offerings and verticals. The 'Reserved' ticketing program, launched in the U.S. with Live Nation, has supported multiple tours and reserved nearly 100,000 tickets, enhancing premium subscriber value. Audiobooks+, an add-on, has doubled its annual recurring revenue to over $100 million, demonstrating the success of 'subscriptions on top of subscriptions' and a new pathway for ARPU expansion.

    05

    Music Agreements for AI Remixing

    Following a prior agreement with UMG, Spotify announced a deal with Merlin, a digital licensing partner for 30,000 independent labels. This agreement allows artists in Merlin's network to participate in Spotify's new AI-powered covers and remixes product, which is being built with a focus on consent, credit, and compensation. Management views this as the first legal way to engage with the AI tailwind in interactive music, with a research preview expected to gather preference data.

    06

    Scale and Financial Strength

    Spotify emphasizes its 'consequential scale' with over 300 million subscribers and 777 million users, positioning it uniquely in the market. Since its 2022 Investor Day, revenue has compounded at 18% annually, reaching EUR 17 billion in 2025. Gross margin expanded from 25% to 33.4% this quarter, and the company generated EUR 2.9 billion in free cash flow last year, with expectations for continued growth towards its 2030 targets.

    AI-generated summary of the company’s earnings call. Not investment advice.