Spotify Technology SA Q4 FY2025 earnings call

Daniel Ek's Remarks

• Expressed gratitude to teams, artists, and investors.
• Emphasized focus on intersection of consumers and creators, being a technology company, and playing the long game.

Alex Norström's Remarks

• Q4 met or exceeded guidance, with highest MAU net additions. Wrapped was record-breaking with over 300M users engaged and over 630M social shares. Paid over $11B to music rights holders in 2025. Podcasting growth with video podcast consumption up over 90% and over 530,000 video podcast shows. Audiobooks expanded in Premium to more markets.

Gustav Söderström's Remarks

• Launched over 50 new features in 2025. Discussed AI role in product evolution, with features like Interactive DJ and Prompted Playlists. Talked about AI in music creation, including net new music and derivatives, and how it drives user engagement.

Christian Luiga's Remarks

• Covered Q4 financial results: total revenue $4,500,000,000, gross margin 33.1%, operating income above forecast, free cash flow $834M. Q1 2026 guidance: 759M MAU, 293M subscribers, total revenue $4,500,000,000 with 15% growth, ARPU growth 5-6%, etc.

Total revenue in Q4 2025 grew 13% to $4,500,000,000. Premium revenue rose 14% driven by subscriber growth. Advertising business grew 4%, with like-for-like growth excluding podcast optimization at approximately 7%. In podcasting, video podcast consumption on Spotify increased by over 90% since the launch of the Spotify Partner Program, with more than 530,000 video podcast shows. Audiobooks expanded in Premium to more markets, with leading publishers noting double-digit growth in audiobooks.

Q1 2026 Forecast

• MAU: 759,000,000 (increase of 8,000,000 from Q4)
• Subscribers: 293,000,000
• Total revenue: $4,500,000,000 (15% growth)
• ARPU growth: 5% to 6%
• Gross margin: 32.8%
• Operating income: $660,000,000

Longer-Term

• Expect improved margin and cash flow in 2026, with pricing adjustments helping revenue growth outpace net content cost growth.

Risks

• Macro changes and competition in AI music could impact business models.
• Potential increase in spammy AI tracks, though Spotify is investing to curb this.
• Variable quarterly margin progression due to timing of disciplined investments in core and monetization activities.

Q: Can you discuss your latest thoughts with respect to AI on one, its role in product and platform evolution for the company, two, its effect to transform your internal processes, and three, the broader audio content creation and distribution landscape?

A: Gustav Söderström talked about AI enabling agentic experiences, internal process transformation with tools like Honk, and how AI enhances product velocity and user engagement in audio content.

Q: What percentage of music on Spotify today is AI generated? How much AI-generated content is being uploaded daily? What is your policy on the uploading of AI music?

A: Gustav Söderström said Spotify doesn't share percentage, but emphasizes creators should be able to use tools, and they work with industry to have metadata on AI use for users.

Q: If you could expand a bit more on Spotify's role in AI music, do you need to invest in content creation tools? How are you helping human creators build audiences and income streams in this environment?

A: Alex Norström and Gustav Söderström discussed AI enhancing personalization, leading to more engagement and lifetime value, and Spotify has the technology to enable creators, with AI driving better personalization and user retention.

Q: With the stock down approximately a third over the last three months, the market appears to be implying Spotify will be negatively impacted from AI. What do you think the market is missing from how Spotify can benefit from AI, and what are your top priorities so you do not fall behind within this new industry landscape?

A: Christian Luiga and Gustav Söderström stated AI is an opportunity, Spotify has been investing in AI for years, and they focus on capturing AI's potential through innovation and disciplined investment.

Q: When should Spotify see easing head subscriber conversions from the recent free tier announcements with a shift towards increasing conversions and subscribers. How does this impact the trajectory of both 2026 MAU and Premium subs?

A: Alex Norström said improved engagement from the free tier leads to increased user growth, which positively impacts subscribers and monetization.

Q: How is agentic coding changing product velocity? What do you believe GenAI could mean for engineer productivity and R&D investment needs?

A: Gustav Söderström discussed agentic coding increasing product velocity, GenAI significantly boosting engineer productivity, and changing R&D investment needs towards leveraging AI for faster development.

Q: With Premium ARPU set to accelerate for much of 2026, should we think about Premium and total margin expansion? Your Q1 margin guide already implied improvement versus the typical seasonality. So can we expect a stronger year for margin expansion than we saw in 2025?

A: Christian Luiga said while not giving full-year guidance, they expect improved margin in 2026 with pricing adjustments helping revenue growth outpace content cost growth, though quarterly progression may be variable.

Q: Back in October, you announced partnership with the major labels to develop artist-first AI products. With all the hype about competition and disruption, can you talk about how you plan to differentiate with these products, and is there an urgency to launch them?

A: Gustav Söderström discussed Spotify's position as the place where music charts and finds an audience, focusing on net new music and derivatives for artists, with eagerness to partner with those seizing the AI opportunity.