Key Takeaways:
Spotify reported Q2 revenue of €4.78 billion, up 14 percent, and reached 300 million premium subscribers, a first for any audio streaming service.
"We have a scale that few companies in history have reached, a business that is healthy and compounding, and opportunities only we are positioned to pursue," Alex Norström, co-CEO at Spotify, said.
Subscription revenue grew 15 percent to €4.33 billion, while ad revenue rose 1 percent to €446 million. Operating income came in at €655 million, above guidance of €630 million, and gross margin hit an all-time high of 33.4 percent, beating the 33.1 percent forecast. Net income was €545 million, compared with a net loss of €86 million a year earlier. Total monthly active users reached 777 million, slightly below guidance of 778 million, which the company attributed to product optimizations.
The subscriber milestone extends Spotify's lead over Apple Music and Amazon Music in paid audio subscriptions. For Q3, the company guides to revenue of €5.0 billion, operating income of €670 million, and 305 million premium subscribers. Shares have fallen more than 15 percent in 2026, though Morgan Stanley raised its price target to $640 from $610 with an Overweight rating, citing new AI features as an attractive entry point.
Spotify launched several new features in Q2, including Reserved in the U.S., which gives artists' most dedicated fans exclusive early access to concert tickets, and Personal Podcasts, which lets users generate personalized AI-powered audio episodes. The company also introduced Articles, a new reading format that pairs written content with audio.
Spotify announced a new agreement with Merlin for its upcoming fan-made covers and remixing tool, giving artists on labels under Merlin's Spotify agreement the option to participate. The tool will launch as a paid add-on, creating an additional revenue stream for participating artists. The company has also expanded its AI offerings with a conversational music assistant for Premium users and AI-powered playlist creation.
Co-CEO Gustav Söderström said the quarter demonstrated the company is "already building that future: better engineering, faster shipping, new products and new ways for users to engage."
The subscriber milestone and record gross margin point to Spotify's pricing power and scale advantages as it expands beyond music into audiobooks and video podcasts. Investors will watch the Q3 earnings call for traction on the AI-powered remixing tool and higher-priced subscription tiers.
This article is for informational purposes only and does not constitute investment advice.
