SPOT — Spotify Technology S.A.

Audio Streaming / Podcasts / Music / Advertising · NYSE · Stockholm, Sweden

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Our View: We Like It

Two years ago, Spotify lost nearly half a billion euros. Last year it made €2.2 billion in operating profit and generated €2.9 billion in free cash flow. 751 million people use it every month. The stock is 38% below its highs. This is a dominant consumer platform that just figured out how to make serious money — and the market hasn't fully adjusted.

01

The Story

Steady Builder Consistent, profitable, dominant market position

For years, the knock on Spotify was simple: great product, no profits. The music labels took most of the money. Margins were thin. Wall Street called it a "forever money-loser." That story is over.

In FY 2023, Spotify posted a -€446 million operating loss. In FY 2025, it posted €2.2 billion in operating profit. That's one of the most dramatic profitability turnarounds in recent tech history. Gross margins went from around 26% to over 33%. Free cash flow hit €2.9 billion. The company is sitting on €9.5 billion in cash.

How did they do it? A combination of price increases that customers actually accepted (minimal churn after multiple hikes), better deals with music labels, aggressive cost cutting, and a relentless focus on engagement. Spotify didn't just raise prices — it made the product better at the same time, with features like the AI DJ, Prompted Playlists powered by ChatGPT, and expanded audiobook access.

The scale is hard to overstate. 751 million people use Spotify every month — more than any other audio platform in the world. 290 million of them pay for Premium. The company added a record 38 million new monthly users in Q4 alone. And the advertising business, while still small relative to Premium, is growing as Spotify builds out its ad exchange and self-serve tools.

The stock is down 38% from its June 2025 high because revenue growth is moderate — about 7% in reported terms, 13% adjusted for currency swings. The market wanted faster top-line growth. But the real story is the earnings explosion happening underneath, and that's what makes this interesting at these prices.

02	The Numbers

Here's the data for those who want to dig in. Spotify reports in euros.

Stock Price

$483

Market Cap

~$100B

Premium Subs

290M

Free Cash Flow

€2.9B

Year	Revenue	Operating Income	Op Margin	MAUs
FY 2023	€13.2B	-€446M	-3.4%	602M
FY 2024	€15.7B	€1.4B	8.7%	675M
FY 2025	€17.2B	€2.2B	12.8%	751M
Q4 2025	€4.53B	€701M	15.5%	751M (+11%)

What the numbers tell us:

The margin story is the real story. Operating margins went from negative to 15.5% in Q4. Gross margins expanded from ~26% to 33%. Revenue growth is moderate, but profitability is growing explosively — operating income nearly doubled from FY2024 to FY2025.

The cash position is massive. €9.5 billion in cash and investments, plus €2.9 billion in annual free cash flow. For a $100 billion company, that's a significant portion of the market cap sitting in cash. It provides a cushion and optionality.

The trailing P/E of ~44x reflects yesterday's earnings, not tomorrow's. If margins keep expanding — and Q4's 15.5% operating margin suggests they will — forward earnings will be meaningfully higher. On a free cash flow basis (~34x), the valuation looks more reasonable for a company with 751 million users and expanding margins.

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SPOT — Spotify Technology S.A.

The Story

The Numbers

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Deep Dive: From losing €446M to making €2.2B — in two years

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