TLDR
- Spotify shares fell 9% in premarket trading after missing Q2 earnings and revenue expectations despite subscriber growth
- The company reported Q2 revenue of €4.19 billion, missing analyst estimates of €4.27 billion due to unfavorable currency movements
- Premium subscribers grew 12% to 276 million, beating expectations of 273 million subscribers
- Q3 operating income forecast of €485 million came in below Street estimates of €562 million due to higher tax charges
- Board approved $1 billion increase to share repurchase program, raising total authorization to $2 billion
Spotify shares took a hit Tuesday morning, falling as much as 10% in premarket trading after the streaming giant delivered mixed second-quarter results. The stock drop snapped back from record highs reached earlier this month.
The Swedish company reported Q2 revenue of €4.19 billion ($4.86 billion), falling short of analyst expectations of €4.27 billion. Revenue was up from €3.81 billion in the same period last year, representing 10% growth.
Currency headwinds played a major role in the revenue miss. Spotify said unfavorable currency movements reduced year-over-year revenue growth by about 440 basis points during the quarter.
Spotify, $SPOT, Q2-25 Results:
📊 EPS: ≈−$0.46 (−€0.42)
💰 Revenue: ≈$4.57B (€4.19B)
📈 Net Loss: ≈$94M (€86M)
🔎 MAUs and Premium Subscribers beat guidance; Free Cash Flow hit a record €700M despite operating income missing forecast due to higher Social Charges pic.twitter.com/65ZUwXjYBW— EarningsTime (@Earnings_Time) July 29, 2025
The company posted an adjusted loss of €0.42 per share, sharply missing forecasts for a profit of €1.97. This marked a decline from earnings of €1.33 per share in Q2 2024.
Operating income also disappointed, pressured by €116 million in social charges related to higher payroll costs. The unfavorable revenue mix further weighed on results.
Despite the financial misses, Spotify delivered strong user growth metrics. Monthly active users rose 11% year-over-year to 696 million, beating estimates of 689 million.
Premium subscribers grew 12% to 276 million, surpassing expectations of 273 million. Ad-supported users climbed 10% to 433 million, also ahead of forecasts.
Guidance Disappoints Wall Street
Looking ahead, Spotify’s third-quarter outlook fell short of analyst expectations. The company forecast operating income of €485 million, below Street estimates of €562 million.
Higher taxes related to employee salaries will continue to pressure profitability in the current quarter. The guidance incorporates €25 million in social charges based on the stock’s Q2 closing price of $767.30.
Third-quarter revenue guidance of €4.2 billion also came in below the Street estimate of €4.48 billion. Monthly active users are expected to reach 710 million, roughly in line with analyst projections of 707 million.
Premium subscriber additions are forecast to increase by 5 million to 281 million total. This projection exceeded the Visible Alpha estimate of 279 million.
The stock had been on a tear heading into earnings, rising about 57% year-to-date and 120% over the past year. Shares hit a record high of $738.45 earlier this month before sliding to around $635 immediately following the results.
Margin Pressures Mount
Gross margin declined to 31.5% in Q2 from a record 32.2% in Q4 2024. The company expects margins to slip further to 31.1% in Q3.
The forecast reflects regulatory charges in the Premium segment estimated to weigh on total gross margin by about 40 basis points. Year-over-year improvements in the ad-supported business will partially offset this impact.
Spotify has been working to improve profitability through price hikes and cost cuts. The company achieved its first annual profit in 2024 after years of losses.
Operating expenses increased 8% in the April-to-June quarter, driven partly by higher marketing costs. Competition from Apple and Amazon has prompted increased spending to attract users.
Despite the earnings disappointment, Spotify continues investing in growth. The company paid over $100 million to podcast creators in Q1 alone, including high-profile names like Joe Rogan and Alex Cooper.
The board approved a $1 billion increase to its share repurchase program, raising total authorization to $2 billion. About $1.9 billion remains available for buybacks through April 2026.
Spotify now has 696 million monthly active users and 276 million premium subscribers as of the end of Q2 2025.
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