Financial Data and Key Metrics Changes - Spotify surpassed 700 million monthly active users (MAU), reaching 713 million, exceeding guidance by 3 million [4][24] - The company added 5 million net subscribers, totaling 281 million, which is a 12% year-on-year increase and in line with guidance [24] - Total revenue for Q3 was EUR 4.3 billion, growing 12% year-on-year on a constant currency basis [24] - Gross margin improved to 31.6%, 50 basis points above guidance and expanding roughly 50 basis points year-on-year [25] - Operating income was EUR 582 million, exceeding forecasts by EUR 97 million [26] - Free cash flow for the quarter was EUR 806 million, with cash and short-term investments totaling EUR 9.1 billion [26] Business Line Data and Key Metrics Changes - In music, Spotify helped artists reach massive audiences, breaking multiple streaming records [10] - In podcasts, over 390 million users streamed video podcasts, a 54% year-on-year increase, with nearly 500,000 video podcast shows available [11] - Audiobook listening hours rose 36% year-on-year, with more than half of eligible Premium users having played an audiobook [12] - The advertising business showed mid-single-digit constant currency growth, with expectations for improvement in 2026 [25][51] Market Data and Key Metrics Changes - Spotify's global rollout of an enhanced free experience contributed significantly to user growth and engagement [9] - The company continues to gain market share in competitive markets, with steady retention rates following recent price increases [9] Company Strategy and Development Direction - Spotify's strategy focuses on long-term value rather than quarterly results, emphasizing user fundamentals and lifetime value [5] - The company is committed to innovation and building partnerships that enhance user experiences and drive growth [6][8] - The transition to co-CEOs is expected to maintain the company's ambitious growth trajectory, aiming for a billion subscribers [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current advertising environment and expects growth to improve in the second half of 2026 [51][60] - The integration of AI is seen as a significant opportunity for enhancing user experiences and creating new revenue streams [35][50] Other Important Information - Spotify has modernized deals with all major labels, securing broader video rights and enhancing its ability to innovate [57][58] - The company is focusing on building a strong creator offering, which is driving growth in video podcasts and overall engagement [63] Q&A Session Summary Question: Can you talk through the puts and takes around gross margins across your premium and advertising segments? - Management noted that gross margin expansion is occurring, with pressure on the premium side due to the shift of podcast content costs [31] Question: Will the premium superfan tier be created by major labels or Spotify? - Management emphasized collaboration with rights holders and the success of add-on subscriptions like Audiobooks Plus, which has seen strong uptake [33] Question: What impact do you believe AI will have on the music ecosystem? - Management highlighted that AI will enhance recommendations and user control, with Spotify integrating into platforms like ChatGPT to personalize user experiences [35][36] Question: How does the partnership with Netflix impact your video strategy? - Management stated that the partnership enhances creator opportunities and revenue potential, aligning with their creator-first philosophy [39][62] Question: How significant is TV-based usage to Spotify today? - Management indicated that building TV experiences is part of their ubiquity strategy, which drives engagement and retention [64] Question: How do you expect future price increases to look? - Management explained that pricing adjustments consider various market factors, and they will act when the timing is right [67]

Financial Data and Key Metrics Changes - Monthly Active Users (MAU) grew by 3 million to 678 million, with 5 million net subscribers added, reaching 268 million, a 12% year-on-year increase [21] - Total revenue was €4.2 billion, growing 15% year-on-year on a constant currency basis [21] - Premium revenue rose 16% year-on-year on a constant currency basis, driven by subscriber growth and ARPU gains [22] - Gross margin came in at 31.6%, surpassing guidance by approximately 10 basis points and expanding about 400 basis points year-on-year [23] - Free cash flow was €34 million, driven by growth in operating income and improving net working capital [24] Business Line Data and Key Metrics Changes - The advertising business delivered currency-neutral growth of 5% year-on-year, with a low double-digit growth excluding near-term impacts from strategic initiatives [22] - The Spotify Partner Program for video podcasters launched in January, expanding to nine new markets and resulting in users spending 44% more time with video content [13] - Audiobooks continued to expand in premium, driving higher user and author engagement [14] Market Data and Key Metrics Changes - Emerging markets drove two-thirds of the subscriber outperformance, particularly in Latin America and Asia Pacific, while developed markets also saw solid growth [15] - Over 10,000 advertisers leveraged new automated tools in Q1, representing a 21% year-over-year increase [19] Company Strategy and Development Direction - The company is focusing on delivering the best possible experience to users and creators, with a commitment to accelerate innovation in 2025, termed the year of accelerated execution [11] - The strategy includes maximizing catalog offerings and enhancing monetization for creators, particularly through the Spotify Partner Program [55] - The company aims to maintain a strong balance sheet while prioritizing internal growth opportunities [72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the broader macro environment's uncertainty but expressed confidence in Spotify's long-term growth trajectory [6] - The company expects a stronger second half of 2025 for MAU net adds, consistent with historical seasonality [90] - Management remains optimistic about the advertising business, despite some pricing softness, due to strong internal demand and a unified ad stack [48] Other Important Information - The company ended the quarter with €8 billion in cash and short-term investments, indicating a strong financial position [24] - The upcoming maturity of exchangeable notes is factored into the capital allocation framework, but the company remains confident in its balance sheet [26] Q&A Session Summary Question: 2025 outlook and gross margin expectations - The company expects Q4 2025 gross margin to be up year-over-year and anticipates MAU net adds to be within the range of the past four years without requiring higher marketing spend [28] Question: Super fan product details - The company is working on higher tiers around new offerings, focusing on increasing value to users while needing support from industry partners [30][32] Question: AI's role in product velocity and efficiency - AI is seen as a key enabler for personalization and productivity, with ongoing investments to enhance user experience and internal processes [38][40] Question: Economics of podcaster payouts - The $100 million payout to podcasters aligns with expectations, with engagement metrics being the primary KPIs to monitor [41][44] Question: Advertising business commentary - Despite pricing softness, the company is seeing strong internal demand and has built a robust advertising platform that welcomes diverse demand sources [46][49] Question: Subscriber growth dynamics - The company is experiencing strong underlying performance, with a focus on enhancing the value-to-price ratio driving subscriber growth [50][51] Question: Video content strategy - The addition of video is driven by creator demand, with ongoing improvements to the TV experience and engagement metrics showing positive trends [56][58] Question: Financial impact from rights renewals - All financial impacts from recent rights renewals are reflected in the financial numbers as per contractual agreements [60] Question: Audiobooks growth strategy - The company sees significant opportunities in improving the user experience for audiobooks and expanding non-English content for international growth [62] Question: Pricing opportunities - The company views pricing as a lever to pull as growth stabilizes, with a focus on maintaining a strong value-to-price ratio [63][68] Question: Capital allocation priorities - The company prioritizes growth opportunities while maintaining a strong balance sheet, with shareholder returns considered as excess capacity rises [70][72] Question: Revenue growth targets - The company remains focused on increasing consumer value, with confidence in reaccelerating growth despite challenges [73][75] Question: Near-term noise and financial implications - The "noise" refers to broader market conditions, with no specific concerns for Spotify's business, maintaining a positive long-term outlook [82] Question: Video podcast consumption trends - Video content consumption has grown significantly, particularly among Gen Z, indicating strong engagement metrics [84]