The news: Spotify’s Q3 2025 earnings outperformed expectations, marking a clear rebound from its earlier cost-cutting phase.
- The company reported $4.62 billion in revenues vs. $4.58 billion expected and 713 million MAUs, including 281 million premium subscribers (up 12% YoY).
- Ad-supported revenues were $484.9 million, down 6% YoY (but flat on a constant currency basis)
- Gross margin climbed to 31.6%, with guidance of 32.9% in Q4.
- While Q4 revenue guidance of $4.86 billion came in light, Spotify expects MAUs to reach 745 million by year-end, up 32 million in 2025.
Why it matters: Spotify’s focus is shifting from scale to efficiency.
- Price hikes, AI-driven cost reduction, and product diversification (including new subscription tiers) are driving margin expansion.
- Despite ad sales slowing to 7% growth YoY, premium subscriptions and ARPU gains ($4.90) are carrying the load.
- Analyst sentiment remains positive: Spotify’s higher-margin initiatives, such as AI-powered personalization and new video integrations, position it to sustain profit growth even as user expansion begins to plateau.
An ‘always-on’ approach: The company’s new partnerships—including a Netflix tie-up for select video podcasts in 2026 and an AI-built Apple TV app—show a stronger multi-format approach.
- The company’s AI-assisted expansion—through ChatGPT-powered playlisting and AI-driven production tools with major labels—show how Spotify is turning machine learning into content and monetization infrastructure.
- The push toward ubiquity across platforms reflects Spotify’s bid to maintain relevance in an attention economy increasingly dominated by YouTube and TikTok.
- Ad recovery is lagging but expected to pick up by 2026 as programmatic buying scales and more advertisers like Amazon and Yahoo join the platform.
What marketers should know: