Spotify Technology SA Q2 FY2025 earnings call

• Strong user and subscriber growth: Sub net adds grew over 30% in H1 2025 vs H1 2024, hit over 100 million subscribers in Europe, and second highest Q2 for MAU net additions. - Ads business: Execution challenge but seeing promising signs in Programmatic, 2025 is a transition year. - User engagement: Enhanced with video podcasts growing 20x faster than audio-only consumption since 2024, over 350 million users streamed video podcasts, DJ engagement nearly doubled, AI playlist expanded to over 40 new markets. - Generative AI impact: Improving user engagement, enabling new product experiences through plain English interactions and iterative improvement.

In Q2, MAU grew by 18 million to 696 million, exceeding guidance by 7 million. Net subscribers added 8 million, finishing at 276 million, up 12% year-on-year and 3 million ahead of guidance. Total revenue was EUR 4.2 billion, growing 15% year-on-year on a constant currency basis. Premium revenue rose 16% year-on-year on a constant currency basis. Advertising business delivered currency-neutral growth of 5% year-on-year. Gross margin came in at 31.5%, in line with guidance and expanding roughly 230 basis points year-on-year. Operating income was EUR 406 million, EUR 133 million below guidance.

• Q3 forecast: MAU 710 million, subscribers 281 million, total revenue EUR 4.2 billion. Q3 gross margin 31.1%, operating income EUR 485 million. - Capital allocation: Board approved upsizing share repurchase authorization to $2 billion, about $100 million utilized prior to Q2. - 2025 outlook: Confident in driving healthy growth despite near-term investments, top of funnel and subscriber performance strong.

• Ads business execution may not meet expectations. - Currency movements can impact reported revenue. - Technological and market changes could affect product development and monetization.

Q: Do you expect to execute the share buyback by the expiration of April 2026?

A: Not going to talk about how much and when and how that will be utilized, but believe buyback is a good tool to use opportunistically.

Q: Could you help us understand the implied FX-neutral ARPU trends for the third quarter?

A: ARPU neutral currency-wise in Q3, driven by developed and emerging markets, short-term emerging markets intake may dilute ARPU, no Q4 guidance yet.

Q: How is Spotify leveraging the advancements in LLMs with reasoning capabilities?

A: Retooling the entire company and technology stack for generative age, wrapping APIs and MCPs, creating agentic infrastructure, products self-improving as LLMs get better with more data and usage