Spotify Q2 Earnings: User Growth Soars 11% Despite Revenue Miss

Rhea-AI Summary

Spotify (NYSE:SPOT) reported mixed Q2 2025 results, with strong user growth but financial metrics falling short of guidance. Total revenue reached €4.193 billion, up 10% YoY (15% constant currency), while operating income grew 53% to €406 million. The company reported a net loss of €86 million.

Monthly Active Users grew 11% YoY to 696 million, exceeding guidance by 7 million users. Premium Subscribers increased 12% to 276 million. The company achieved a record Free Cash Flow of €700 million, up 43% YoY.

Notable developments include a €1 billion increase to the share repurchase program, doubling it to €2 billion, and expansion of Audiobooks in Premium to new European markets. Q3 2025 guidance projects 710 million MAUs and revenue of €4.2 billion.

Positive

• Record Free Cash Flow of €700 million, up 43% year-over-year
• MAUs exceeded guidance by 7 million, reaching 696 million (11% YoY growth)
• Premium Subscribers grew 12% YoY to 276 million
• Share repurchase program doubled to €2 billion
• Gross Margin improved 227 basis points YoY to 31.5%
• Operating Income increased 53% YoY to €406 million

Negative

• Revenue missed guidance by €107 million due to currency headwinds
• Operating Income fell short of forecast by €133 million
• Net Loss of €86 million compared to €274 million profit last year
• Ad-Supported revenue declined 1% year-over-year
• Higher-than-expected Social Charges impacted profitability by €98 million

Spotify on Tuesday, July 29, 2025, announced second-quarter financial results that showed robust growth in its user base, surpassing its own guidance, while revenue and operating income fell short of forecasts due to currency fluctuations and higher-than-expected social charges.

The audio streaming giant reported a significant increase in both Monthly Active Users (MAUs) and Premium Subscribers, signaling continued momentum in audience expansion. However, the company also detailed the impact of unfavorable foreign exchange movements and costs tied to its share price appreciation on its top and bottom lines.

In a move to enhance shareholder returns, Spotify's Board of Directors also approved a $1 billion increase to its existing share repurchase program, doubling the total authorization to $2 billion.

Financial Performance Snapshot

For the second quarter of 2025, Spotify's results showed a mixed picture of strong underlying growth tempered by external financial pressures. The company's performance beat its own projections for user metrics but missed on key financial targets.

• Total Revenue: €4.193 billion, a 10% increase year-over-year (15% on a constant currency basis). This was below the guidance of €4.3 billion, with the company attributing the miss to a €104 million negative impact from currency movements.
• Gross Margin: 31.5%, in line with guidance and representing a year-over-year improvement of 227 basis points.
• Operating Income: €406 million, a 53% increase from the prior year but below the company's forecast of €539 million.
• Free Cash Flow: A record €700 million for the quarter, marking a 43% year-over-year increase and highlighting strong cash generation.
• Net Loss Attributable to Owners: €86 million, compared to a net income of €274 million in the same period last year.

Revenue and Profitability Analysis

Spotify's total revenue growth was driven primarily by its Premium segment, which generated €3.740 billion, up 12% year-over-year. The company attributed this performance to strong subscriber gains and increases in Average Revenue Per User (ARPU) when excluding foreign exchange impacts. On a constant currency basis, Premium revenue grew 16%.

The Ad-Supported segment, however, saw revenue decline by 1% year-over-year to €453 million. The company noted that on a constant currency basis, this segment grew by 5%, driven by growth in impressions sold in music and podcast advertising, though this was partially offset by softness in pricing.

The company’s Gross Margin of 31.5% reflected improvements in both the Premium and Ad-Supported businesses. Premium gross margin rose to 33.1%, which Spotify said was due to revenue growth outpacing music costs. The Ad-Supported gross margin saw a significant year-over-year expansion to 18.3%, driven by better contributions from podcasts and music.

Operating income missed guidance largely due to higher-than-forecasted Social Charges, which are payroll taxes linked to employee share-based compensation. These charges amounted to €115 million in the quarter, €98 million more than anticipated, as a result of the company's share price appreciation. The company stated that it does not forecast share price movements in its guidance, leading to such variances.

User Growth Outperforms Expectations

Spotify reported strong momentum in user acquisition, exceeding its projections for the second quarter.

• Total Monthly Active Users (MAUs) grew 11% year-over-year to reach 696 million, beating the company's guidance of 689 million by 7 million users.
• Premium Subscribers increased by 12% year-over-year to 276 million, surpassing the forecast of 273 million.

The company said this outperformance was driven by growth across all geographic regions, with notable strength in the Rest of World and Latin America. Successful marketing campaigns in developing markets and what the company described as "favorable shifts in competitor dynamics" also contributed to the strong results.

Strategic and Platform Developments

Alongside its financial results, Spotify highlighted several strategic initiatives aimed at expanding its platform and content offerings.

The company expanded its Audiobooks in Premium offering to four new European markets: Germany, Austria, Switzerland, and Liechtenstein, providing access to over 350,000 titles. It also launched a new add-on subscription, Audiobooks+, in 13 markets to provide users with additional listening hours.

Other platform enhancements included the launch of voice requests for its AI-powered DJ feature in over 60 markets and an expansion of its Spotify Ad Exchange (SAX) partnership with Magnite to broaden access to its advertising inventory.

Outlook for Q3 2025

Spotify provided the following forward-looking guidance for the third quarter of 2025, which it noted is subject to substantial uncertainty.

• Total MAUs: An expected 710 million, implying 14 million net new additions.
• Total Premium Subscribers: A forecast of 281 million, an addition of 5 million.
• Total Revenue: Projected to be €4.2 billion, which assumes a significant headwind from foreign exchange rates.
• Gross Margin: Expected to be 31.1%, incorporating a regulatory charge in the Premium segment.
• Operating Income: Forecasted at €485 million, which includes an estimated €25 million in Social Charges.

This article is based solely on information provided in Spotify's press release dated July 29, 2025. The content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. Stock Titan and its writers make no representations as to the accuracy, completeness, or timeliness of the information. Investors should conduct their own due diligence before making any investment decisions.

Source: Spotify

FAQ

What were Spotify's (SPOT) key Q2 2025 financial results?

Spotify reported revenue of €4.193 billion (up 10% YoY), operating income of €406 million (up 53% YoY), and a net loss of €86 million. Free Cash Flow reached a record €700 million.

How many users does Spotify have in Q2 2025?

Spotify reached 696 million Monthly Active Users (up 11% YoY) and 276 million Premium Subscribers (up 12% YoY), both exceeding company guidance.

What is Spotify's share repurchase program size after the recent increase?

Spotify's Board approved a €1 billion increase to its share repurchase program, bringing the total authorization to €2 billion.

What is Spotify's revenue guidance for Q3 2025?

Spotify projects Q3 2025 revenue of €4.2 billion, with expected headwinds from foreign exchange rates.

Why did Spotify miss its Q2 2025 financial targets?

Spotify missed targets due to €104 million in negative currency impacts and €98 million in higher-than-expected Social Charges related to share price appreciation.

What new features did Spotify launch in Q2 2025?

Spotify expanded Audiobooks in Premium to four new European markets, launched Audiobooks+ in 13 markets, and introduced voice requests for AI DJ in over 60 markets.