Spotify shares rise after Q3 revenue beats despite net income drop

Spotify Technology (SPOT) shares climbed nearly 4% on Thursday, outperforming the S&P 500 index, following the release of third-quarter results that showed a decline in net income but strong growth in revenue and user base.

The company reported revenue of almost 5 billion euros ($5.6 billion), representing 16% year-over-year growth. Premium services accounted for the majority of this total, with revenue rising 17% to nearly 4.5 billion euros ($5 billion). Ad-supported offerings contributed the remainder, increasing 10% to 482 million euros ($540 million).

User metrics continued to expand, with total monthly active users (MAU) growing 11% to 788 million. Premium subscribers increased by 9% to reach 306 million. Despite these top-line gains, attributable net income fell to 518 million euros ($580 million) from 899 million euros ($1 billion) in the same period last year. On a per-share basis, this translated to 2.48 euros ($2.78), which was below the consensus analyst estimate of 2.84 euros ($3.18).

The drop in profitability was influenced by accounting factors in the prior year. In the third quarter of 2025, Spotify benefited from significant finance income related to share, bond, and warrant valuations, along with a 72 million euro ($81 million) tax benefit. Excluding these distortions, the company exceeded its guidance for operating income, which came in at 672 million euros ($753 million). The firm also recorded a record gross margin of 33% and generated free cash flow of 735 million euros ($823 million).

Management outlined several growth initiatives, including expanding its audiobook business from the current 22 countries to over 180. The company is also in the early stages of deploying artificial intelligence to offer subscribers customized services, such as AI-generated playlists, to enhance the listening experience.

For the fourth quarter, Spotify guided for 818 million MAUs, an increase of nearly 9% from the same period in 2025. It expects premium subscribers to rise by less than 9% to 316 million. Revenue is projected to grow by almost 15% to 5.2 billion euros ($5.8 billion), while operating income is expected to increase 17% to 820 million euros ($919 million). The company did not provide a net income forecast for the period.