SPOT NYSE Russell 1000 Earnings call
Spotify (SPOT) · Q2 2026 results and valuation
Share price: $609.12 · 2026-11-11
Spotify provides an audio streaming service that offers music, podcasts, and audiobooks to users. The company operates in 184 countries and territories, providing both ad-supported and premium subscription models for its audience. Source: 20-F annual report (2026-02-10)
Results Q2 2026 vs Q1 2026 · previous quarter · published 4 Aug 2026 and 28 Apr 2026
Net income down 24.4% on the previous quarter. Management sounded cautious, in its script and in answers to analysts.
1 · Numbers
−24.4%
Net income vs Q1 2026
Outlook given
Net income 545.0M vs 721.0M
Revenue +5.4%
Why Net income fell because the quarter was lower relative to quarter 1 due to the timing of cash tax payments and temporarily elevated operating expenses in quarter 2 and quarter 3.
2 · How management spoke
Cautious
Among the least upbeat of all company calls
Answers to analysts: upbeat, in line with the script.
Similar to last call.
3 · What stood out
Spotify exceeded its subscriber guidance by crossing 300 million subscribers for the first time while increasing the number of active days for global subscribers.
Valuation
Is Spotify undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2025-12-31), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 13.6% growth a year (3-year revenue growth), the model's fair value is $509.87 a share — the stock trades 19% above it. Today's price assumes 16.1% growth a year.
Current price
$609.12
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+16.1% for 10 yrs
Fair value / share
$509.87
Buy below
$382.40
Price vs fair value
Overvalued 19%
Price vs buy-below price
Overvalued 59%
Read between the lines
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Guidance
Spotify expects its free cash flow to continue growing after generating EUR 2.9 billion in the previous year.
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Guidance
Gross margin reached 33.4%, surpassing guidance by 30 basis points and representing a year-over-year expansion of 193 basis points.
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Figure
Premium revenue rose approximately 16% year-over-year compared to 15% last quarter because of 9% subscriber growth and 7.4% ARPU expansion.
Source quote
“Premium revenue rose approximately 16% year-over-year versus 15% last quarter, driven by subscriber growth of 9% and ARPU expansion of 7.4% year-over-year.”
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Guidance
Spotify exceeded its subscriber guidance by crossing 300 million subscribers for the first time while increasing the number of active days for global subscribers.
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Figure
Spotify anticipates a quarter 3 gross margin of 32.9%, which is approximately 130 basis points above the prior year.
Source quote
“We anticipate a quarter 3 gross margin of 32.9%, approximately 130 basis points above the prior year.”
4 more
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Guidance
The company expects marketing and AI-related investments to drive approximately EUR 200 million in incremental operating expense for the full year.
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Figure
The agreement allows artists across 30,000 labels in Merlin's network to make their catalogs available for covers and remixes.
Source quote
“The agreement gives artists across 30,000 labels in Merlin's network, the opportunity to participate and make their catalogs available for covers and remixes.”
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Key theme
Spotify expects its ads business to inflect towards double-digit growth in the second half of 2026.
Source quote
“We continue to expect our ads business to inflect towards double-digit growth in the second half of 2026.”
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Key theme
The company expects to gain more pricing power as it delivers more value to its customers.
Source quote
“And of course, the more value we deliver, the more pricing power we will have.”
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q2 2026. Ring: Q1 2026.
Script and answers carried a similar tone, so the script's message held up under questioning.
Sentences that drove the tone
“Premium revenue rose approximately 16% year-over-year versus 15% last quarter, driven by subscriber growth of 9% and ARPU expansion of 7.4% year-over-year.”
“That strength is why we set the 2030 targets we did in May, a mid-teens revenue CAGR, gross margin of 35% to 40%, operating margin above 20% and strong growth...”
“This reflects an ARPU increase consistent with quarter 2 and improved growth in our advertising business that I mentioned earlier.”
Full figures
EUR · SEC EDGAR 6-K accession 0001628280-26-052543 (interim statement of operations; Spotify is a 20-F/6-K filer with no quarterly XBRL) (period end 2026-06-30)
| Metric | Q2 2026period end 2026-06-30 | Q1 2026period end 2026-03-31 | Change |
|---|---|---|---|
| Revenue | 4.78B | 4.53B | +5.4% |
| Gross profit | 1.60B | 1.50B | +6.8% |
| Operating income | 655.0M | 715.0M | −8.4% |
| Net income | 545.0M | 721.0M | −24.4% |
| EPS | 2.61 | 3.45 | −24.3% |
| P/E today 51.5 | — | — | — |
Topics
Most discussed now
- Spotify's automated sales channel continued to grow fast and represented nearly 40% of its ad-supported revenue in quarter 2, up...
- New Spotify gets praised, Live Nation gets praised for the partnership with it and the way it is sort of shaping this...
- To capitalize on this opportunity, Spotify is adjusting elements like product optimization and ad load, among other things in select...
- Chirp lets Spotify's engineers switch models mid-task and route every job to the best available price performance, including open source...
- This quarter, that stopped being a road map and became behavior....
Faded since Q1 2026
- Fading Listening and watching more days per month
- Fading Any comments on the segment growth rates are on a like-for-like basis.
- Fading Outperformance was led by rest of the world and North America where Spotify continued to benefit from its enhanced free...
- Fading Should I just give you a little bit more flavor on the second quarter gross margin guide as you asked...
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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Q3
impact of product optimization and ad load on MAU
Source quote
“Yes, this will show itself in our Q3 MAU, but we believe it's well worth it.”
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2030
target goals for revenue CAGR, gross margin, operating margin, and free cash flow
Source quote
“That strength is why we set the 2030 targets we did in May, a mid-teens revenue CAGR, gross margin of 35% to 40%, operating margin above 20% and strong growth in free cash flow.”
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in the coming weeks
rolling out Prompted Playlist for Audiobooks to our best-in-class books experience
Source quote
“And in the coming weeks, we'll be rolling out Prompted Playlist for Audiobooks to our best-in-class books experience.”
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second half of 2026
ads business to inflect towards double-digit growth
Source quote
“We continue to expect our ads business to inflect towards double-digit growth in the second half of 2026.”
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quarter 3
MAU of 788 million
Source quote
“Looking ahead to quarter 3, we are forecasting MAU of 788 million, an increase of 11 million from quarter 2.”