Spotify Stock Jumps 8.6% as Q4 Profit Outlook Beats Estimates

TLDR

• Spotify stock climbed 8.6% after its fourth-quarter operating income forecast exceeded Wall Street expectations.
• Spotify expects €820 million in fourth-quarter operating income, compared with analysts’ €813.4 million estimate.
• The company projects 316 million premium subscribers by year-end, above the 314.7 million analyst forecast.
• Third-quarter revenue reached €4.97 billion, while earnings per share of €2.48 missed expectations.
• Spotify expanded its AI music plans through licensing deals with Believe, Universal Music Group, Merlin and Kobalt.

Spotify (SPOT) stock gained 8.6% on Thursday after the streaming company forecast fourth-quarter operating income above Wall Street estimates. Shares rose despite a wider technology selloff tied to AI spending concerns.

Spotify Technology S.A., SPOT

Spotify gained paying subscribers in the third quarter, although revenue and earnings missed forecasts. Management expects stronger operating profit before year-end.

Spotify Stock Climbs on Profit Forecast

Spotify expects fourth-quarter operating income of €820 million, above LSEG’s €813.4 million analyst estimate. The company forecast €5.2 billion in revenue for the final quarter.

Operating income reached €672 million in the September quarter, near Visible Alpha’s €671.8 million estimate. Revenue totaled €4.97 billion versus forecasts of €4.98 billion. Earnings per share reached €2.48, below expectations of €2.80. The company reported a gross margin of 33%.

Spotify cited higher marketing, cloud and AI costs. The spending follows industry investment, including Meta’s recent AI launches. Management described those costs as temporary.

Premium Subscriber Outlook Beats Estimates

Spotify ended September with 306 million premium subscribers after adding six million during the quarter. It now projects 316 million by December, versus analysts’ 314.7 million estimate.

Monthly active users reached 788 million, up 1% from June. Spotify expects 818 million by year-end, slightly below Wall Street’s estimate of 819 million.

Other streaming companies face different pressures. Netflix lowered its advertising revenue forecast Wednesday. Spotify’s latest outlook instead centers on growth in paid music subscriptions.

AI Tools Remain a Spending Priority

Spotify uses AI DJ and prompt-based playlists to help users discover music. It has connected its service with outside AI tools to handle listening requests.

The company faces emerging AI music services, including Suno and Udio. Spotify is developing licensed features for fans to create covers and remixes.

Co-CEO Alex Norström said Spotify invests when it finds growth opportunities. The company expects costs to moderate after higher marketing and cloud expenses.

New Licensing Deals Cover AI Remixes

Spotify signed an agreement with Believe on Tuesday for its planned paid remix tool. The deal also covers TuneCore artists. Participating artists can approve use of their music and earn royalties.

Similar deals cover Universal Music Group, Merlin and Kobalt. Spotify plans to offer the tool as a Premium add-on amid questions about AI revenue and spending.

Spotify has not set a launch date or price. The company continues expanding its audio products while seeking subscriber growth and higher profit.

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