Spotify Technology SA’s (NYSE:SPOT) strong third-quarter 2025 performance exceeded expectations on profits and margins, powered by robust premium subscriptions, higher user growth and improving ad-supported profitability.
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The streaming giant's outlook points to continued margin gains and rising operating income into the fourth quarter, reinforcing its growing efficiency and sustained demand across both premium and ad-supported segments.
Goldman Sachs analyst Eric Sheridan maintained a Neutral rating on Spotify with a price forecast of $770.
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Sheridan expects Spotify stock to climb following its strong third-quarter 2025 results backed by stronger premium revenue and improved ad-supported gross margins.
Spotify's total revenue grew 7% year-over-year to 4.27 billion euros ($4,902,643,200), topping Goldman's 4.20 billion euros forecast and the Street's 4.23 billion euros estimate. Premium revenue of 3.83 billion euros outpaced both Goldman's and consensus estimates, while ad-supported revenue of 446 million euros came in slightly below forecasts. The platform added five million premium subscribers, reaching 281 million, and gained 17 million monthly active users (MAUs) for a total of 713 million, modestly ahead of projections.
Gross margins also exceeded expectations, expanding to 31.6% versus Goldman's and consensus estimates of 31.1%. Premium margins stood at 33.2%. The ad-supported margins improved sharply to 18.4%, up 525 basis points year-over-year, highlighting stronger profitability in Spotify's advertising business.
Operating income reached 582 million euros, well above Goldman's 486 million euros estimate and the Street's 501 million euros, for an operating margin of 13.6%. Earnings per share of 3.28 euros far exceeded forecasts of 2.02 euros (Goldman) and 1.96 euros (consensus).
Sheridan noted Spotify's fourth-quarter 2025 guidance implies continued margin strength despite a mild revenue shortfall versus expectations. The company expects total revenue of 4.5 billion euros (compared to the analyst’s estimate of 4.6 billion euros and consensus 4.56 billion euros).
He expects premium subscribers to reach 289 million and MAUs rising to 745 million. Spotify forecast gross margins of 32.9% and operating income of 620 million euros, both ahead of prior estimates.
SPOT Price Action: Spotify shares were trading lower by 3.53% to $620.43 at publication on Tuesday.
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