Source: Inderes & Bloomberg (34 etimates)

Spotify's Q2 report came in slightly above our expectations on profitability, demonstrating continued operational momentum, while the top line landed in line with guidance and our estimate. Premium subscribers outperformed slightly and crossed the 300m milestone, and gross margin set a new record. MAUs were marginally below guidance, but we see the stronger paying base as the higher-quality outcome. In our view, the main offset is a slightly softer Q3 guide. While revenue matches our expectations, gross margin and EBIT are slightly below our estimates, as operating expenses remain elevated through Q3. MAU and subscriber guidance were also somewhat softer than we expected, and shares are down ~4% in pre-market trading. Following the report, we see broadly unchanged short-term headline estimates, as the Q2 EBIT beat is partly offset by the softer Q3 guide, with revenue estimates largely intact. We continue to view the long-term thesis as intact.

Premium crossed the 300m milestone, but MAUs landed just below guidance

MAUs reached 777m (Q1'26: 761m), 1m below both our 778m estimate and the company's guidance, representing q/q net additions of 16m vs. the guided 17m. According to the company, growth was broad-based across regions, led by Rest of World, Europe and North America. Premium subscribers came in at 300m (Q1'26: 293m), 1m above our 299m estimate and guidance, implying +7m q/q, with growth across all regions and strong global promotional intake — supported by a record single day of subscriber intake around Spotify's 20th-anniversary in-app campaign. Ad-supported MAUs were 494m, in line with our forecast.

Premium ARPU was EUR 4.89 (Inderes: EUR 4.88), up 7% y/y on a reported basis and +7.4% y/y FX-neutral, in line with the 7-7.5% guidance and our estimate. As expected, FX headwinds moderated sharply to ~70 bps from Q1's ~600 bps, so reported and FX-neutral growth largely converged. The FX-neutral performance was driven by the flow-through of recent price increases, partially offset by product/market mix. We view the continued ARPU acceleration as further validation of our pricing power thesis.

Q2 revenue grew 14% y/y to 4.78 BEUR, in line with both our 4.78 BEUR estimate and the ~4.8 BEUR guidance. Premium revenue grew ~15% y/y to 4.33 BEUR, while ad-supported revenue came in at 446 MEUR (+1% y/y on a reported basis), which we view as still muted as engagement continues to outpace monetization. We will look for qualitative comments from management that the guided reacceleration into H2'26 remains intact during the upcoming earnings call.

Gross margin hit an all-time high, with EBIT ahead despite the OpEx step-up

The gross margin came in at a record 33.4% (Q2'25: 31.5%), above both our 33.1% estimate and the company's 33.1% guidance, driven by continued Premium margin expansion as revenue growth outpaced music costs (net of Marketplace programs, audiobooks and video podcast costs). We note that, in contrast to Q1, ad-supported gross margin also contributed positively this quarter (+179 bps y/y), as favorable podcast and tax impacts more than offset higher music and other costs of revenue stemming from elevated engagement.

Operating income (EBIT) was 655 MEUR (Q2'25: 406 MEUR), corresponding to a ~13.7% margin, beating both our 639 MEUR estimate and the company's 630 MEUR guidance. Importantly, the beat was operational; social charges* were only 1 MEUR, which was 9 MEUR below the company's 10 MEUR guidance assumption. This indicates that the ~16 MEUR beat against our estimate reflects gross-margin strength rather than the social charges line. Operating expenses showed the previously guided increase, driven by higher compute costs for AI training and development tools, alongside marketing for new features. This is relatively consistent with the ~200 MEUR combined Q2-Q3 OpEx step-up quantified at the May Investor Day. That said, the guided Q3 EBIT implies somewhat higher OPEX than we had estimated, and we will be looking for comments on the expected cost moderation trajectory toward the end of the year on the call.

Spotify's reported free cash flow was 797 MEUR, in line with our estimate. This brings LTM free cash flow to 3.3 BEUR, as higher net income was partially offset by movements in net working capital. The liquidity and balance sheet remain robust, with 9.4 BEUR in cash and short-term investments and no debt other than lease liabilities following the Q1 repayment of the Exchangeable Notes. Year-to-date through August 3rd, Spotify repurchased 662 MUSD in shares (+30% y/y), which we continue to read as primarily anti-dilutive.

Q3 guidance: solid top line, but the OpEx step-up still weighs before Q4 moderation

Spotify guided Q3 MAUs to ~788m (+~11m q/q), below our 795m estimate. Premium subscriber guidance of 305m (+5m q/q) was broadly in line to slightly below our expectations. Revenue guidance of ~5.0 BEUR (+16% y/y) was in line with our ~4.95 BEUR estimate, with FX expected to be a 200 bps tailwind to growth. Q3 EBIT guidance of 670 MEUR implies a ~13.5% margin, slightly below our estimate (694 MEUR, 14%) and roughly flat-to-down sequentially from Q2's ~13.7%, alongside a softer gross-margin guide of 32.9%. This suggests that elevated Q2-Q3 operating expenses are still weighing on Q3 results. This is consistent with management’s plan for spending to moderate in Q4'26 and 2027, as outlined at the May Investor Day, though costs are slightly higher than our previous estimates.

Prior to the Q2 print, our 2026 revenue estimate stood at ~19.6 BEUR (+14% y/y) with a 14.5% EBIT margin. Following the Q2 report, we expect our short-term revenue estimates to remain broadly intact, as the Q2 EBIT beat is largely offset by the softer Q3 gross-margin and EBIT guide. The continued FX-neutral revenue growth, pricing flow-through, and strong Premium gross margin remain supportive of our medium-term thesis.

Alongside the report, Spotify announced a Merlin licensing agreement for its upcoming fan-made covers and remixing tool, extending to the independent sector (Merlin represents ~15% of the recorded-music market) the model unveiled with Universal in May. The tool will launch as a paid add-on that shares economics with participating artists, broadening rights coverage ahead of launch and reinforcing the "power-law" add-on monetization strategy in a way consistent with management's margin-neutral-to-accretive framing. We view this as a strategic/optionality signal rather than a near-term earnings driver.

* Social charges are payroll taxes that vary with Spotify's share price due to their link to share-based compensation in certain countries.