The news: Spotify can still attract users, but disappointing subscriber growth forecasts and higher costs related to AI-powered features aren’t inspiring investor confidence.

Q2 by the numbers:

• Ad revenues: €446 million ($503.2 million), up 1% YoY and 16% QoQ after a large dip in Q1.
• Ad-supported monthly active users (MAUs): 494 million, up 14% YoY.
• Premium subscribers: 300 million, up 9% YoY.
• Total MAUs: 777 million, below Spotify’s previous guidance of 778 million.
• Q3 MAU forecast: 788 million, below average analyst estimate of 793.5 million, per Bloomberg.
• Operating income: €655 million ($738.9 million), up 61% YoY.

The company attributed its miss on MAUs in Q2 to ongoing “product optimizations.” Spotify’s shares initially fell more than 5% in pre-market trading Tuesday but since recovered.

Zooming in: The earnings illustrate a disconnect where engagement remains healthy but new subscriptions are slowing and advertising remains uneven.

• That raises questions about whether Spotify can translate user interest into advertising performance, particularly as marketers seek clear return on ad spend (ROAS) across channels.
• Soft subscriber and advertising growth alongside cautious guidance suggest Spotify hasn’t solved the challenge of turning engagement into durable revenue growth.

Growing its subscriber base has been Spotify’s main engine for revenues. A miss on user expectations could lead the streamer to rely on more price hikes, which could in turn spark churn and subscription fatigue and put greater pressure on advertising and monetization of AI features to power future development.

Recommendations for brands: Spotify is a valuable channel for reach, but brands should closely evaluate incrementality and audio’s role alongside video and retail media.

• Test Spotify’s on-platform measurement capabilities and ROI before expanding investment.
• Experiment with newer AI-powered ad products while requiring clear performance and attribution benchmarks.
• Spread campaign efforts across multiple formats, including both video and audio podcasts, to maximize brand-building and conversion opportunities.

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