Spotify will report its Q3 results on October 22. We expect continued top-line momentum driven by steady user growth and Premium ARPU expansion, while profitability still reflects the guided step-up in operating expenses. In our view, the key watchpoints are whether subscriber growth holds up despite the added friction in the free tier, whether the ad business is finally re-accelerating, and whether the Q4 guidance confirms the expected cost moderation and a return to margin expansion. Ahead of the print, we have lowered our reported Q3 EBIT estimate due to higher social charges* and made minor cuts to our H2 top-line estimates. We have also reviewed our longer-term estimates, trimming our MAU and advertising assumptions and slightly raising our expectations for Premium monetization. Our revenue estimates decrease slightly, while near-term earnings estimates are broadly unchanged. As our longer-term estimates now carry less growth risk, we raise our target price to USD 580 (was USD 570), bringing it more in line with our DCF value. After the recent share price rise, we lower our recommendation to Accumulate (was Buy).

User growth and ARPU acceleration to drive the top line

We forecast Q3 revenue to grow by 16% y/y to 4.95 BEUR (Q3'25: 4.27 BEUR), broadly in line with the ~5.0 BEUR guidance. Premium ARPU remains the key driver, with FX-neutral growth guided at ~7% (in line with Q2) and FX turning into a ~200 bps tailwind. In the ad-supported segment, we expect a meaningful acceleration in H2 as the rebuilt programmatic ad stack scales further (Q3'26e: +12%). After a prolonged period of soft growth (Q2'26: +1% y/y), we view this as an important proof point. We expect MAUs and Premium subscribers to reach 789m and 305m, respectively (+12m/+5m q/q), broadly in line with guidance. Spotify has deliberately added friction to the free tier in selected emerging markets, and Q3 is the first real test of management's argument that softer MAU growth will not hurt subscriber growth.

Social charges weigh on Q3 EBIT, long-term estimates fine-tuned

We estimate the Q3 gross margin at 32.9%, with the step-down from Q2's record 33.4% reflecting reinvestments and a recurring Q3 regulatory fee. We have lowered our reported Q3 EBIT estimate to 662 MEUR (13.4% margin; was 671 MEUR) to reflect higher social charges after the ~6% share price increase during the quarter (Inderes est. ~19-20 MEUR vs. ~9 MEUR guided). Our adjusted EBIT estimate of 671 MEUR remains in line with guidance (670 MEUR). We have also revisited our longer-term estimates. Given the softer recent MAU development and management's choice to prioritize monetization over reach in emerging markets, we now consider our previous long-term MAU trajectory too optimistic. We have trimmed our MAU estimates, which also lowers our ad-supported revenue estimates, and we stay more cautious on advertising growth until the acceleration is visible. At the same time, we have slightly raised our Premium monetization assumptions, as we expect recent product launches (e.g., AI music features, prompted playlists, audiobook expansion, and fitness) to support engagement and pricing power. Net-net, our revenue estimates decrease by 1-2% for the coming years and by ~4% for 2030e, while our EBIT estimates are broadly unchanged near term (2030e: -2%), implying a slightly more positive view on margins.

Valuation remains attractive

In this update, we have lowered our acceptable valuation ranges, mainly on EV/EBIT. This reflects a normalization of Spotify's free cash flow conversion as the cash tax rate rises and the working-capital tailwind fades. The share price has continued to climb since our Q2 update (~+10%), and Spotify trades at EV/EBIT of 24x-19x, EV/FCFF of 24x-19x, and EV/GP of 11x-9x for 2027-2028. The multiples are at the lower end of our ranges for 2027 and clearly below them for 2028. We continue to view the elevated 2026 OpEx as temporary and non-structural, even though it introduces some short-term earnings risk. We expect double-digit revenue growth, improving Premium monetization, and margin expansion to drive strong earnings growth in the coming years. As our revised long-term estimates now rely less on user growth and an advertising recovery, we see fewer reasons to keep our target price notably below our DCF value (USD 589).