Core Viewpoint - Spotify (SPOT) is positioned as a strong investment opportunity due to significant upward revisions in earnings estimates, indicating a positive outlook for the company's financial performance [1][2]. Current-Quarter Estimate Revisions - The earnings estimate for the current quarter is $2.17 per share, reflecting a substantial increase of +106.67% compared to the same period last year [4]. - Over the past 30 days, the Zacks Consensus Estimate for Spotify has risen by 14.29%, with two estimates increasing and two decreasing [4]. Current-Year Estimate Revisions - For the full year, Spotify is projected to earn $9.69 per share, which is a +62.86% increase from the previous year's figure [5]. - The consensus estimate has improved by 9.34% over the past month, with three estimates moving higher and three going lower [5]. Favorable Zacks Rank - Spotify currently holds a Zacks Rank 2 (Buy), indicating a favorable position based on the positive estimate revisions [6]. - Research indicates that stocks with Zacks Rank 1 (Strong Buy) and 2 (Buy) tend to outperform the S&P 500 significantly [6]. Bottom Line - Spotify shares have increased by 30.5% over the past four weeks, suggesting strong investor confidence driven by the positive earnings estimate revisions [7].

Core Viewpoint - The S&P 500 is experiencing a bull market with a 23% return over the past year, while Spotify's stock has surged by 180%, driven by strong subscriber growth and effective cost management [1] Group 1: Subscriber Growth and Revenue - Spotify ended 2024 with a record 675 million monthly active users, including 425 million free users and 263 million premium subscribers, the latter contributing 87% of total revenue [2] - The premium subscriber count exceeded management's forecast by 3 million, indicating strong demand [2] - Spotify generated $16.3 billion in total revenue during 2024, marking an 18% year-over-year increase, up from 13% growth in 2023 [6] Group 2: Cost Management and Profitability - Spotify reduced its operating expenses by approximately 12% in 2024, which included cuts in research and development and marketing [7] - The combination of accelerating revenue growth and cost reductions led to a net income of $1.2 billion in 2024, a significant turnaround from a net loss of $554 million in 2023 [8] Group 3: Stock Valuation - Spotify's stock is currently trading at a P/E ratio of 109 based on earnings per share of $5.74 for 2024, significantly higher than the S&P 500's P/E ratio of 25.5 [9] - The P/S ratio for Spotify reached an all-time high of 7.8, double its long-term average of 3.9 [10] Group 4: Future Outlook - CEO Daniel Ek has projected that Spotify's annual revenue could reach $100 billion by 2032 and that the monthly active user base could exceed 1 billion by 2030 [11]

Group 1 - Astrada Advisors provides actionable recommendations aimed at enhancing portfolio performance and uncovering alpha opportunities, backed by a strong track record in investment research at leading global investment banks [1] - The company specializes in technology, media, internet, and consumer sectors across North America and Asia, excelling in identifying high-potential investments and navigating complex industries [1] - Astrada Advisors leverages extensive local and global experience to offer unique insights on market developments, regulatory changes, and emerging risks [1] Group 2 - The research conducted by Astrada Advisors integrates rigorous fundamental analysis with data-driven insights, providing a nuanced understanding of key trends, growth drivers, and competitive landscapes [1] - The focus of the company is to empower investors with timely research and a comprehensive view of industry dynamics, especially in volatile markets or when exploring new trends [1] - Astrada Advisors is committed to delivering superior insights to facilitate informed investment decisions [1]

Investment Rating - The report maintains a "Buy" rating for Spotify (SPOT.US) with a target price adjusted to $700, indicating a potential upside of 12% from the current price of $626 [5][6]. Core Insights - The company's overall performance exceeded expectations, with FY24 Q4 revenue reaching €4.242 billion, a year-on-year increase of 15.6%, and a gross margin improvement of 5.6 percentage points to 32.2% [3][4]. - User growth remains strong, with FY24 Q4 Monthly Active Users (MAU) increasing by 12% to 675 million, driven by emerging markets [4]. - The company has demonstrated strong pricing power, with Average Revenue Per User (ARPU) rising by 5% to €4.85, contributing to a 16.9% increase in Premium revenue [4]. Financial Performance Summary - FY24 Q4 revenue: €4.242 billion, up 15.6% YoY, exceeding market expectations by 1.9% [3]. - FY24 Q4 operating profit: €477 million, with a net profit of €367 million, achieving a record net profit margin of 8.7% [3]. - FY25E/FY26E revenue projections: €18.1 billion and €20.8 billion respectively, with adjusted EBITDA expected to be €2.736 billion and €3.552 billion [5][6]. User and Revenue Growth - FY24 Q4 MAU reached 675 million, with subscription users at 263 million, primarily driven by growth in emerging markets [4]. - Premium revenue for FY24 Q4 was €3.705 billion, reflecting a 16.9% increase YoY, supported by both user growth and ARPU increase [4]. Advertising Business Outlook - The advertising segment showed modest growth, with Ad-Supported revenue increasing by 7.2% to €537 million, although this was partially offset by pricing weakness [5]. - The company is enhancing its programmatic advertising technology and seeking more partnerships to boost ad inventory sales, with expectations for significant growth in this area by 2026 [5].

Core Insights - Spotify Technology S.A. is a leading music streaming application with a vast user base, boasting hundreds of millions of users [1] Group 1 - The stock of Spotify has experienced significant volatility and drama throughout its market presence, indicating a turbulent investment journey for shareholders [1]

PART I [Key Information](index=7&type=section&id=Item%203.%20Key%20Information) This section details significant risks to Spotify's business, covering competitive pressures, content licensing, intellectual property, operational dependencies, regulatory challenges, financial metrics, indebtedness, taxation, and share ownership [Risks Related to Business Model, Strategy, and Performance](index=8&type=section&id=Risks%20Related%20to%20Our%20Business%20Model,%20Strategy,%20and%20Performance) Spotify's growth and profitability face risks from intense competition, challenges in user monetization, and the uncertain profitability of new content formats like podcasts and audiobooks - The company faces robust competition from well-funded competitors like **Apple, Alphabet, and Amazon**, who leverage broader ecosystems and offer services at little to no profit[30](index=30&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - While achieving an operating income of **€1,365 million in 2024**, Spotify incurred significant operating losses of **€446 million in 2023** and **€659 million in 2022**, with a cumulative deficit of **€3,044 million** as of December 31, 2024[48](index=48&type=chunk) - Expansion into audiobooks and video content carries risks, with no guarantee of sufficient revenue to offset costs, increased capital requirements, or new competition[44](index=44&type=chunk)[55](index=55&type=chunk) - The value of the long-term investment in **Tencent Music Entertainment (TME)** is subject to risks from TME's business and potential changes in Chinese government regulations on foreign investments[60](index=60&type=chunk) [Risks Related to Content Licensing](index=15&type=section&id=Risks%20Related%20to%20Securing%20the%20Rights%20to%20the%20Content%20We%20Stream) Spotify's reliance on third-party content licenses, particularly from major labels, creates risks of unfavorable terms, increased royalty rates, and significant financial commitments not tied to growth - Content from **Universal Music Group, Sony Music Entertainment, Warner Music Group, and Merlin** accounted for approximately **71% of audio content streams** from record labels for the year ended December 31, 2024[68](index=68&type=chunk) - As of December 31, 2024, estimated future financial commitments under license agreements total **€4.4 billion**, which are not always tied to revenue or user growth, posing a risk to margins[75](index=75&type=chunk) - A lawsuit by the **Mechanical Licensing Collective (MLC)** alleging underpayment of royalties for the Premium Service bundle was dismissed with prejudice on January 29, 2025, but the MLC retains appeal rights[64](index=64&type=chunk) [Risks Related to Intellectual Property](index=18&type=section&id=Risks%20Related%20to%20Intellectual%20Property) The company faces risks from third-party intellectual property infringement claims, which can lead to costly litigation, and challenges in protecting its own IP, including potential disclosure requirements from open-source software use - Third parties frequently assert intellectual property infringement claims, potentially leading to significant defense costs, damages, or unfavorable license agreements[80](index=80&type=chunk)[81](index=81&type=chunk) - Protecting the company's own intellectual property is difficult and costly, with risks of unauthorized copying and varying legal enforcement across jurisdictions[83](index=83&type=chunk)[86](index=86&type=chunk) [Risks Related to Operations](index=19&type=section&id=Risks%20Related%20to%20Our%20Operations) Operational risks include dependency on third-party platforms, vulnerability to cyberattacks, and compliance with complex global regulations on data privacy, content moderation, and AI, which can increase costs and liabilities - Reliance on competing platforms like **Apple and Google** creates competitive disadvantages through restricted access, unfavorable payment terms, and data limitations; the European Commission fined Apple **€1.84 billion** in March 2024 for anti-competitive conduct following a Spotify complaint[88](index=88&type=chunk)[89](index=89&type=chunk) - Vulnerability to sophisticated cyberattacks poses risks of regulatory fines, litigation, and loss of user trust, compounded by heavy reliance on **Google Cloud Platform (GCP)** for critical infrastructure[93](index=93&type=chunk)[99](index=99&type=chunk) - Complex global regulations like **GDPR, UK GDPR, and CCPA** impose stringent data privacy requirements with penalties up to **4% of global annual turnover**, while the **EU's Digital Services Act (DSA)** adds content moderation compliance costs[103](index=103&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - Reliance on **Adyen and PayPal** for payment processing exposes the company to significant harm from disruptions or non-compliance with payment card network rules[122](index=122&type=chunk) [Risks Related to Metrics](index=27&type=section&id=Risks%20Related%20to%20Our%20Metrics) The accuracy of key metrics like Monthly Active Users (MAUs) is subject to measurement challenges and manipulation attempts, which can distort data, harm reputation, and negatively impact financial results - Key metrics like **MAUs** are internally calculated and not independently validated, with potential overstatements due to multiple accounts or shared usage[133](index=133&type=chunk) - Third-party attempts to artificially manipulate stream counts can distort data, harm relationships with rights holders and advertisers, and negatively affect key performance indicators[136](index=136&type=chunk) [Risks Related to Indebtedness](index=28&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) Spotify's **$1.5 billion** in 0% Exchangeable Senior Notes due 2026 poses risks of limiting cash flow, restricting financing, and causing significant variability in reported net income due to fair value accounting - The company holds **$1.5 billion** in principal amount of **0% Exchangeable Senior Notes due 2026**, increasing vulnerability to adverse economic conditions and limiting financial flexibility[138](index=138&type=chunk) - Exchangeable Notes are accounted for at fair value through profit and loss, causing significant variability in reported net income due to fair value changes[143](index=143&type=chunk) [Risks Related to Tax](index=29&type=section&id=Risks%20Related%20to%20Tax) Spotify faces complex tax risks including limitations on net operating loss carry-forwards, volatility from share price impact on social costs, and potential adverse consequences from international tax reforms or Passive Foreign Investment Company (PFIC) classification - Significant net operating loss carry-forwards, including **€870 million in Sweden** and **€238 million in the U.S.**, may have limited utilization due to ownership change regulations[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Social costs on share-based compensation fluctuate significantly with share price, impacting quarterly performance; 2024 expense was **€291 million**, compared to **€71 million in 2023**[148](index=148&type=chunk)[149](index=149&type=chunk) - Evolving international tax reforms, including **OECD's Pillar One and Pillar Two**, could increase tax liability, with Luxembourg enacting Pillar Two legislation effective January 1, 2024[153](index=153&type=chunk)[154](index=154&type=chunk) - Risk of **Passive Foreign Investment Company (PFIC)** classification could result in adverse U.S. federal income tax consequences for U.S. shareholders, though the company does not believe it was a PFIC for 2024[157](index=157&type=chunk) [Risks Related to Share Ownership](index=32&type=section&id=Risks%20Related%20to%20Owning%20Our%20Ordinary%20Shares) Spotify's ordinary share price is volatile, and founders Daniel Ek and Martin Lorentzon maintain significant voting control, which may deter acquisitions and impact share price, with no expected dividends in the foreseeable future - The trading price of ordinary shares has been volatile, with a closing price range of **$187.94 to $502.38 in 2024**[160](index=160&type=chunk) - As of December 31, 2024, founders **Daniel Ek and Martin Lorentzon** controlled a combined voting power of **70.7%**, enabling control over substantially all shareholder matters[167](index=167&type=chunk)[168](index=168&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future, meaning investor returns depend on share price appreciation[164](index=164&type=chunk) [Risks Related to Luxembourg Incorporation and Foreign Private Issuer Status](index=33&type=section&id=Risks%20Related%20to%20Investment%20in%20a%20Luxembourg%20Company%20and%20Our%20Status%20as%20a%20Foreign%20Private%20Issuer) As a foreign private issuer, Spotify is exempt from certain U.S. securities laws, potentially providing less information to investors, while enforcing U.S. judgments in Luxembourg is difficult due to differing shareholder rights and lack of reciprocal treaties - As a foreign private issuer, Spotify is exempt from certain **SEC rules**, including proxy and Section 16 'short-swing' profit recovery provisions, potentially leading to less available shareholder information[171](index=171&type=chunk)[172](index=172&type=chunk) - Enforcing U.S. court judgments in Luxembourg is difficult due to the absence of a reciprocal recognition treaty, potentially hindering investors' ability to enforce U.S. federal securities law claims[175](index=175&type=chunk)[176](index=176&type=chunk) [Company Information](index=35&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details Spotify's business operations, dual revenue model, content offerings, global user base, licensing agreements, competitive landscape, human capital management, and physical properties [Business Overview](index=35&type=section&id=B.%20Business%20Overview) Spotify, the world's largest audio streaming service, operates a two-sided marketplace with **675 million MAUs** and **263 million Premium Subscribers** as of year-end 2024, offering diverse content and experiencing rapid growth in Latin America and Rest of World regions User Metrics as of December 31, 2024 | Metric | Value | Year-over-Year Growth | | :--- | :--- | :--- | | Monthly Active Users (MAUs) | 675 million | 12% | | Premium Subscribers | 263 million | 11% | - The content library includes over **100 million music tracks**, **6.5 million podcast titles**, and over **350,000 audiobooks** available for purchase, with a subset for Premium subscribers[183](index=183&type=chunk) MAU Growth by Region (2023 to 2024) | Region | % of Total MAUs | YoY Growth | | :--- | :--- | :--- | | Europe | 27% | 7% | | North America | 17% | 4% | | Latin America | 22% | 14% | | Rest of World | 34% | 20% | [Licensing Agreements](index=37&type=section&id=Licensing%20Agreements) Spotify relies on complex licensing agreements with rights holders, including major music companies and Merlin, accounting for **71% of label-delivered audio streams**, and obtains mechanical and public performance rights through compulsory licenses, direct deals, and collecting societies - Licenses with **Universal Music Group, Sony Music Entertainment, Warner Music Group, and Merlin** accounted for approximately **71% of audio content streams** from record labels for the year ended December 31, 2024[206](index=206&type=chunk) - In the U.S., mechanical rights for musical compositions are obtained via a blanket compulsory license administered by the **Mechanical Licensing Collective (MLC)**, with rates set by the Copyright Royalty Board[210](index=210&type=chunk) [Competition](index=39&type=section&id=Competition) Spotify faces intense competition across music streaming, podcasts, audiobooks, and online advertising from major players like Apple Music, YouTube Music, Amazon Music, Audible, Alphabet, and Meta - Key competitors in music streaming include **Apple Music, YouTube Music, and Amazon Music**[219](index=219&type=chunk) - In the podcast space, Spotify competes with **Apple Podcasts, YouTube, and Audible**[219](index=219&type=chunk) - For advertising revenue, Spotify competes with large online platforms such as **Alphabet, Meta, and Amazon**[219](index=219&type=chunk) [Organizational Structure](index=41&type=section&id=C.%20Organizational%20Structure) Spotify Technology S.A. is the parent company of a global group, with principal operating subsidiaries including Spotify AB in Sweden and Spotify USA Inc., alongside other entities for sales, marketing, and support services worldwide - The main operating company is **Spotify AB** in Sweden, with **Spotify USA Inc.** serving as the primary U.S. operating company[233](index=233&type=chunk) [Property, Plant and Equipment](index=41&type=section&id=D.%20Property,%20Plant%20and%20Equipment) Spotify's principal offices are in Stockholm and New York; an Office Space Optimization Initiative in 2023 led to **€43 million** and **€123 million** in non-cash real estate impairment charges in 2024 and 2023, respectively - The company's main offices are located in **Stockholm** (approximately **485,000 sq ft**) and **New York** (approximately **594,000 sq ft**)[234](index=234&type=chunk) - An Office Space Optimization Initiative resulted in non-cash impairment charges on real estate assets of **€43 million in 2024** and **€123 million in 2023**[235](index=235&type=chunk)[241](index=241&type=chunk) [Operating and Financial Review and Prospects](index=42&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes Spotify's financial performance, highlighting **18% total revenue growth to €15.7 billion** in 2024, a significant turnaround to **€1,365 million operating income**, and continued user growth with **675 million MAUs** and **263 million Premium Subscribers** [Key Performance Indicators](index=45&type=section&id=Key%20Performance%20Indicators) Spotify's key user metrics showed solid growth in 2024, with **MAUs increasing 12% to 675 million**, Premium Subscribers growing **11% to 263 million**, and Premium ARPU rising **7% to €4.69** due to price increases Key Performance Indicators (as of Dec 31, 2024) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | MAUs (millions) | 675 | 602 | 12% | | Premium Subscribers (millions) | 263 | 236 | 11% | | Ad-Supported MAUs (millions) | 425 | 379 | 12% | | Premium ARPU (annual avg.) | €4.69 | €4.39 | 7% | [Operating Results](index=47&type=section&id=A.%20Operating%20Results) In 2024, total revenue grew **18% to €15,673 million**, driven by **19% Premium revenue growth** and **10% Ad-Supported revenue growth**, leading to a significant gross margin improvement to **30%** and an operating income of **€1,365 million** due to reduced operating expenses Revenue by Segment (in € millions) | Segment | 2024 (€ millions) | 2023 (€ millions) | % Change | | :--- | :--- | :--- | :--- | | Premium | 13,819 | 11,566 | 19% | | Ad-Supported | 1,854 | 1,681 | 10% | | **Total** | **15,673** | **13,247** | **18%** | Gross Profit and Margin by Segment | Segment | Gross Profit 2024 (€ millions) | Gross Margin 2024 | Gross Profit 2023 (€ millions) | Gross Margin 2023 | | :--- | :--- | :--- | :--- | :--- | | Premium | 4,495 | 33% | 3,335 | 29% | | Ad-Supported | 229 | 12% | 62 | 4% | | **Consolidated** | **4,724** | **30%** | **3,397** | **26%** | Operating Expenses (in € millions) | Expense Category | 2024 (€ millions) | 2023 (€ millions) | % Change | | :--- | :--- | :--- | :--- | | Research and development | 1,486 | 1,725 | (14)% | | Sales and marketing | 1,392 | 1,533 | (9)% | | General and administrative | 481 | 585 | (18)% | [Liquidity and Capital Resources](index=50&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Spotify's liquidity significantly strengthened in 2024, with cash and investments rising to **€7,448 million**, driven by **€2,301 million** in operating cash flow, while managing **$1.5 billion** in Exchangeable Notes and **€8.3 billion** in total contractual obligations - Cash, cash equivalents, and short-term investments increased by **€3,234 million** to **€7,448 million** as of December 31, 2024[301](index=301&type=chunk) Cash Flow Summary (in € millions) | Cash Flow Activity | 2024 (€ millions) | 2023 (€ millions) | | :--- | :--- | :--- | | Net cash flows from operating activities | 2,301 | 680 | | Net cash flows used in investing activities | (1,486) | (217) | | Net cash flows from/(used in) financing activities | 729 | 234 | - Free Cash Flow for 2024 was **€2,285 million**, a significant increase from **€678 million in 2023**, primarily due to higher net cash from operating activities[309](index=309&type=chunk)[311](index=311&type=chunk) Contractual Obligations as of Dec 31, 2024 (in € millions) | Obligation Type | Total (€ millions) | Less than 1 year (€ millions) | 1-3 years (€ millions) | | :--- | :--- | :--- | :--- | | Minimum guarantees | 4,420 | 3,021 | 1,395 | | Exchangeable Notes | 1,449 | — | 1,449 | | Lease obligations | 745 | 114 | 205 | | Purchase obligations | 1,687 | 598 | 991 | | **Total** | **8,316** | **3,748** | **4,040** | [Critical Accounting Estimates](index=53&type=section&id=E.%20Critical%20Accounting%20Estimates) Critical accounting estimates involve revenue recognition, share-based compensation valuation, complex royalty accruals, deferred tax asset assessment, legal contingencies, and fair value measurement of financial instruments like Exchangeable Notes - Estimating royalty costs is highly complex, involving judgments on rates for unidentified rights holders and potential duplicate claims; approximately **€351 million** of royalty liabilities as of December 31, 2024, were incurred more than 12 months prior[331](index=331&type=chunk)[335](index=335&type=chunk) - The fair value of stock options is estimated using the **Black-Scholes model**, requiring subjective assumptions about volatility, expected term, and risk-free rates[327](index=327&type=chunk) - The fair value of Exchangeable Notes is a critical estimate, determined using a binomial option pricing model and market prices, with the company's share price as a primary valuation driver[339](index=339&type=chunk) - If the dismissed MLC lawsuit appeal were successful, additional royalties for March 1 to December 31, 2024, would be approximately **€150 million**, plus potential penalties and interest[333](index=333&type=chunk) [Directors, Senior Management, and Employees](index=57&type=section&id=Item%206.%20Directors,%20Senior%20Management,%20and%20Employees) This section details Spotify's leadership, board structure, and employee base, including executive compensation programs and the average full-time employee count of **7,691 in 2024**, reflecting recent reorganizations [Directors and Senior Management](index=57&type=section&id=A.%20Directors%20and%20Senior%20Management) Spotify's leadership includes founder and CEO Daniel Ek, co-founder Martin Lorentzon, and key executives, supported by a ten-member board of directors with diverse industry experience - The senior management team is led by **Daniel Ek (Founder, CEO, Chairman)**, with key roles held by **Christian Luiga (CFO)**, **Alex Norström (Co-President, Chief Business Officer)**, and **Gustav Söderström (Co-President, Chief Product & Technology Officer)**[351](index=351&type=chunk) [Compensation](index=63&type=section&id=B.%20Compensation) Spotify's executive compensation program emphasizes equity and long-term shareholder value, with CEO Daniel Ek receiving no salary since 2017, and other named executive officers participating in a flexible incentive mix program - CEO **Daniel Ek** has not received a base salary since July 1, 2017[391](index=391&type=chunk)[393](index=393&type=chunk) - The company offers an incentive mix program allowing employees to allocate awards among cash, **RSUs**, at-the-money options, and out-of-the-money options[400](index=400&type=chunk) 2024 Summary Compensation for Named Executive Officers | Name | Position | Total Compensation ($) | | :--- | :--- | :--- | | Daniel Ek | CEO | 667,308 | | Christian Luiga | CFO | 6,048,634 | | Dustee Jenkins | Chief Public Affairs Officer | 6,314,662 | | Alex Norström | Co-President, CBO | 16,607,071 | | Gustav Söderström | Co-President, CPTO | 18,733,869 | [Employees](index=72&type=section&id=D.%20Employees) In 2024, Spotify's average full-time employee count decreased to **7,691**, with Research and Development being the largest department and the United States the largest geographical location Average Number of Employees by Department | Department | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Research and Development | 3,944 | 4,719 | (16)% | | Sales and Marketing | 2,177 | 2,403 | (9)% | | General and Administrative | 1,068 | 1,338 | (20)% | | Content Production and Customer Service | 502 | 663 | (24)% | | **Total** | **7,691** | **9,123** | **(16)%** | [Major Shareholders and Related Party Transactions](index=81&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details Spotify's ownership structure, highlighting founders Daniel Ek and Martin Lorentzon's significant voting control of **29.1%** and **41.6%**, respectively, and the company's related party transaction policy Major Shareholder Voting Power (as of Dec 31, 2024) | Shareholder | % of Ordinary Shares | % of Beneficiary Certificates | % of Total Voting Power | | :--- | :--- | :--- | :--- | | Daniel Ek | 14.3% | 38.4% | 29.1% | | Martin Lorentzon | 9.8% | 61.6% | 41.6% | | Baillie Gifford & Co | 7.6% | — | 2.9% | | Tencent | 8.2% | — | — | - Beneficiary certificates carry no economic rights but provide one vote per certificate, significantly concentrating voting power with the founders[475](index=475&type=chunk)[477](index=477&type=chunk) [Financial Information](index=82&type=section&id=Item%208.%20Financial%20Information) This section covers Spotify's legal proceedings, including a dismissed MLC lawsuit subject to appeal, and its dividend policy, noting no cash dividends have been paid or are anticipated in the foreseeable future - The company has never declared or paid cash dividends and does not expect to in the foreseeable future, retaining earnings for working capital and general corporate purposes[487](index=487&type=chunk) - A lawsuit by the **Mechanical Licensing Collective (MLC)** alleging underpayment of royalties was dismissed with prejudice in January 2025, but the MLC is entitled to appeal[844](index=844&type=chunk)[901](index=901&type=chunk) [Additional Information](index=84&type=section&id=Item%2010.%20Additional%20Information) This section outlines material contracts, including an Investor Agreement with Tencent granting Daniel Ek's entity voting power, and key tax considerations for shareholders, covering Luxembourg withholding tax, potential PFIC classification for U.S. holders, and FATCA compliance - A material **Investor Agreement with Tencent** grants an entity controlled by CEO **Daniel Ek** the sole and exclusive right to vote Spotify securities beneficially owned by Tencent[500](index=500&type=chunk) - For U.S. Holders, dividends are generally ordinary income, with a risk of **Passive Foreign Investment Company (PFIC)** classification leading to adverse tax consequences, though the company does not believe it was a PFIC in 2024[544](index=544&type=chunk)[549](index=549&type=chunk) - Dividends are generally subject to a **15% withholding tax in Luxembourg**, potentially reduced by double tax treaties, such as to **5%** for a U.S. corporate holder owning at least **10%** of voting stock[510](index=510&type=chunk)[511](index=511&type=chunk) [Market Risk Disclosures](index=92&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Spotify is exposed to currency, interest rate, share price, and investment risks, with significant sensitivity to exchange rate fluctuations, impacts on Exchangeable Notes and social costs from share price changes, and concentrated investment risk in **Tencent Music Entertainment (TME)** shares - **Currency Risk:** A **10% strengthening of the USD** against the Euro would increase income before tax by **€70 million**, while a **10% strengthening of the SEK** would decrease it by **€16 million**, as of December 31, 2024[569](index=569&type=chunk)[570](index=570&type=chunk) - **Interest Rate Risk:** A hypothetical **100 basis point change in interest rates** would have impacted interest income by **€54 million** for the year ended December 31, 2024[572](index=572&type=chunk) - **Share Price Risk:** A **10% change in Spotify's share price** would change the fair value of its Exchangeable Notes by approximately **€30-36 million** and change the accrual for social costs by **€33 million** as of December 31, 2024[574](index=574&type=chunk) - **Investment Risk:** A **10% change in TME's share price** would change the fair value of Spotify's investment by approximately **€155-156 million** as of December 31, 2024[575](index=575&type=chunk) PART II [Controls and Procedures](index=95&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with Ernst & Young AB issuing an unqualified opinion on the latter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[584](index=584&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2024, based on the **COSO framework**, with an audit by **Ernst & Young AB** confirming this assessment[586](index=586&type=chunk) [Corporate Governance & Cybersecurity](index=95&type=section&id=Item%2016.%20Corporate%20Governance%20%26%20Cybersecurity) This section details Spotify's corporate governance, including its Code of Conduct, adherence to Luxembourg governance practices as a foreign private issuer, and its cybersecurity risk management program overseen by the Audit Committee - As a foreign private issuer, Spotify is exempt from certain **NYSE corporate governance requirements**, including independent compensation committees and shareholder approval for all equity compensation plans[600](index=600&type=chunk)[601](index=601&type=chunk) - The company's cybersecurity risk management program is integrated into enterprise risk management and overseen by the **Audit Committee**, which receives quarterly updates[606](index=606&type=chunk)[609](index=609&type=chunk) - The company's **Head of Security**, with over **20 years of experience**, is responsible for managing material cybersecurity risks[612](index=612&type=chunk) PART III [Financial Statements](index=100&type=section&id=Item%2018.%20Financial%20Statements) This section presents Spotify's audited consolidated financial statements for 2022-2024, prepared under **IFRS**, with Ernst & Young AB providing an unqualified opinion on both the financial statements and internal control over financial reporting [Report of Independent Registered Public Accounting Firm](index=107&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young AB issued an unqualified opinion on Spotify's consolidated financial statements and internal control over financial reporting, identifying **Music Royalty Costs** as a Critical Audit Matter due to its complexity and judgment requirements - The auditor, **Ernst & Young AB**, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[633](index=633&type=chunk)[643](index=643&type=chunk) - The audit identified **Music Royalty Costs** as a Critical Audit Matter due to the complexity of proprietary systems, significant data volume, and judgment required for royalty calculations[637](index=637&type=chunk)[639](index=639&type=chunk) [Consolidated Financial Statements](index=110&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show significant improvement in 2024, with net income of **€1,138 million**, total assets growing to **€12,005 million**, total equity more than doubling to **€5,525 million**, and operating cash flow increasing to **€2,301 million** Consolidated Statement of Operations (in € millions) | Line Item | 2024 (€ millions) | 2023 (€ millions) | 2022 (€ millions) | | :--- | :--- | :--- | :--- | | Revenue | 15,673 | 13,247 | 11,727 | | Gross profit | 4,724 | 3,397 | 2,926 | | Operating income/(loss) | 1,365 | (446) | (659) | | **Net income/(loss)** | **1,138** | **(532)** | **(430)** | | **Diluted EPS (€)** | **5.50** | **(2.73)** | **(2.93)** | Consolidated Statement of Financial Position (in € millions) | Line Item | Dec 31, 2024 (€ millions) | Dec 31, 2023 (€ millions) | | :--- | :--- | :--- | | Cash and cash equivalents | 4,781 | 3,114 | | Short term investments | 2,667 | 1,100 | | **Total Assets** | **12,005** | **8,346** | | Exchangeable Notes | 1,539 | 1,203 | | **Total Liabilities** | **6,480** | **5,823** | | **Total Equity** | **5,525** | **2,523** | Consolidated Statement of Cash Flows (in € millions) | Line Item | 2024 (€ millions) | 2023 (€ millions) | 2022 (€ millions) | | :--- | :--- | :--- | :--- | | Net cash flows from operating activities | 2,301 | 680 | 46 | | Net cash flows used in investing activities | (1,486) | (217) | (423) | | Net cash flows from/(used in) financing activities | 729 | 234 | (40) |

Audio streaming giant Spotify (NYSE: SPOT) shares jumped 13% on February 4 after the company reported its first full year of profitability since its launch more than 16 years ago.The company has consistently posted strong financial results throughout 2024, and the cost-cutting measures put in place starting in 2023 paid off, along with strong user growth and pricing adjustments driving the surge.Spotify year-to-date price chart. Source: Google FinanceSpotify shares closed January 4 at $621.77, hitting fresh ...

Spotify continues to fire on all cylinders, including impressive margin improvements.Spotify stock jumped 10% on Tuesday after earnings were released. Travis Hoium covers the big move in this video.*Stock prices used were end-of-day prices of Feb. 4, 2025. The video was published on Feb. 4, 2025. ...

Core Viewpoint - Spotify Technology S.A. reported strong quarterly sales and user growth, leading to positive analyst ratings despite slightly missing earnings per share estimates [1][2][3]. Financial Performance - Quarterly earnings were $1.88 per share, below the analyst estimate of $2.06, while quarterly sales reached $4.53 billion (4.24 billion euros), up 16% and exceeding the consensus estimate of $4.15 billion [1]. - Monthly average user (MAU) net additions were 35 million, surpassing guidance by 10 million, and subscriber net additions were 11 million, exceeding guidance by 3 million [2]. Analyst Ratings and Expectations - Goldman Sachs analyst Eric Sheridan reiterated a Buy rating with a price target of $550, while JP Morgan analyst Doug Anmuth maintained an Overweight rating [3]. - Analysts expect a positive market reaction due to strong revenue growth, premium subscriber count momentum, and gross margins of 32.2%, above the company's guidance of 31.8% [3]. Forward Guidance - The company guided fiscal first-quarter 2025 MAUs in line with estimates, premium subscribers slightly ahead, and total revenue in line, with operating profit expected to be approximately 23% higher than previous estimates [4]. - The profitability trend into 2025 is viewed favorably, alleviating investor concerns regarding potential headwinds from management commentary and industry news [5]. Strategic Insights - Sheridan's analysis highlights stable user and subscriber trends, rising pricing, and effective subscriber funnel conversion as key drivers for revenue and operating margin improvement [6]. - JP Morgan noted that Spotify is making progress towards medium-term financial targets, with expectations for strong performance across all metrics in the first quarter [8]. Upcoming Earnings Call Focus - Analysts will seek updates on gross margin drivers, operating income, free cash flow, MAU and premium subscriber growth, and pricing strategies during the upcoming earnings call [9].

Here's our initial take on Spotify's (SPOT 10.11%) fourth-quarter financial report.Key MetricsMetricQ4 2023Q4 2024Changevs. ExpectationsRevenue3.67 billion euros4.24 billion euros+16%BeatEarnings per share(0.36 euros)1.76 eurosN/AMissPremium subscribers236 million263 million+11%n/aFree cash flow396 million euros877 million euros+121%n/aCapping an Incredible YearSpotify turned its attention to profits and free cash flow in 2024, and boy did it deliver. Through a combination of price increases and cost cuttin ...