Spotify(US:SPOT)2025-11-04 14:00Financial 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]