GICS Sector : Technology
Spotify Technology S.A., together with its subsidiaries, provides audio streaming services worldwide.It operates through Premium and Ad-Supported segments.The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers.
Spotify's Q4 2025 financial performance was impressive, with total revenue growing 13% to $4.5 billion, driven by a 14% increase in premium revenue due to subscriber growth. The company's gross margin expanded 80 basis points to 33.1%, and operating income was $701 million. Earnings per share (EPS) came in at $4.43, significantly beating analyst estimates of $2.67. Free cash flow was $834 million, and the company ended the quarter with $9.5 billion in cash and short-term investments.
Publication Date: Feb -11
The company's monthly active users (MAU) net additions reached an all-time high, with over 3.5% of the world's population as subscribers. The advertising business grew 4%, with 7% growth excluding podcast optimization strategies. Spotify's focus on solving problems at the intersection of consumers and creators, being a technology company driving innovation, and a long-term orientation has driven its success.
Gustav Söderström emphasized that Spotify is well-positioned to benefit from AI, with a business model that combines ads and subscriptions. The company launched over 50 new features in 2025, including Prompted Playlists and AI DJ, which have driven engagement and time spent on the platform. Spotify is working towards delivering the world's most intelligent, agentic media platform, allowing users to interact with Spotify in a more personalized and dynamic way.
Spotify's current valuation metrics indicate a premium price for the stock, with a P/E Ratio of 58.41, P/S Ratio of 4.87, and EV/EBITDA of 42.9. Analysts estimate revenue growth at 13.8% for next year. The company's strong financial performance, combined with its innovative AI strategy, positions it for continued growth and success.
For Q1, Spotify forecasts 759 million MAU, 293 million subscribers, and $4.5 billion in revenue, representing a 15% growth rate. The company plans to continue investing in AI, with a focus on creating a dataset of language to music, podcasts, and books. Spotify's guidance implies improvement in gross margin and operating margin in 2026, although they do not provide full-year guidance on gross margin.
Spotify Shares Rally on Strong Outlook. Can the Stock's Momentum Continue?
Feb -14
Strong Results Drive Analyst Confidence in Spotify Technology S.A. (SPOT)
Feb -14
JP Morgan Reduces Price Target on Spotify (SPOT) to $700
Feb -13
Earnings Beat: Spotify Technology S.A. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
Feb -13
Spotify CEO delivers strong message on its future
Feb -11
Spotify Technology's Profit Growth Driven by Subscribers, Pricing, New Tiers, BofA Says
Feb -11
Spotify shares rise after record profits and spike in subscribers
Feb -11
Spotify (SPOT) Skyrockets 14.7% on Strong Earnings
Feb -11
Spotify’s premium music subscription growth driven by increasing adoption, improving user experience, and expanding global footprint, particularly in emerging markets.
Spotify's free version with ads will be driven by increasing adoption of music streaming services, growth in mobile internet penetration, and rising demand for entertainment content.
A free music streaming service that allows users to listen to music with occasional ads
A paid music streaming service that offers ad-free listening, offline playback, and improved audio quality
A paid music streaming service designed for two users, offering ad-free listening and offline playback
A paid music streaming service designed for families, offering ad-free listening and offline playback for up to six users
A platform that provides artists with tools to manage their music, track their performance, and connect with fans
A platform that provides podcasters with tools to host, distribute, and monetize their podcasts
A self-serve ad platform that allows advertisers to create and manage audio ads
A platform that provides insights and analytics for artists, labels, and industry professionals
Spotify has a low threat of substitutes due to its unique features, such as Discover Weekly and Release Radar, which provide users with personalized playlists and music recommendations. Additionally, Spotify's vast music library and user-friendly interface make it difficult for substitutes to compete.
Spotify's customers have some bargaining power due to the availability of alternative music streaming services, such as Apple Music and Tidal. However, Spotify's strong brand recognition and user loyalty mitigate this power to some extent.
Spotify's suppliers, such as music labels and artists, have limited bargaining power due to the company's dominant position in the music streaming market. Spotify's ability to negotiate favorable licensing agreements with suppliers further reduces their bargaining power.
The threat of new entrants in the music streaming market is moderate, as it requires significant investment in technology, content, and marketing. However, new entrants could potentially disrupt the market with innovative features or business models.
The intensity of rivalry in the music streaming market is high, with several established players, such as Apple Music and Amazon Music, competing for market share. The market is highly competitive, with companies constantly innovating and improving their services to attract and retain customers.
| Value | |
|---|---|
| Debt Weight | 32.50% |
| Debt Cost | 3.79% |
| Equity Weight | 67.50% |
| Equity Cost | 12.06% |
| WACC | 9.37% |
| Leverage | 48.16% |
Value: 1.7
Growth: 6.6
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Yield: 2.5
Momentum: 8.5
Volatility: 6.0
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Volatility: 2.7
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