Spotify’s Subscriber Boom Can’t Hide Ad Woes: Analyst – Spotify Technology (NYSE:SPOT)

Wall Street analysts rerated Spotify Technology SPOT after the company’s quarterly results. The stock gained on Wednesday.

Spotify posted a loss of 48 cents per share for the second quarter, a considerable deviation from the analyst consensus estimate of a $2.11 profit.

Missed revenue projections compounded this earnings shortfall. Quarterly sales reached $4.75 billion (4.19 billion euros), marking a 10% year-over-year increase but falling short of the analyst projection of $4.84 billion.

Also Read: Why Spotify’s Latest Results Look Worse Than They Are

Despite these operational successes, Spotify’s third-quarter 2025 revenue outlook fell short of market expectations. The company forecasts revenue of $4.95 billion (4.2 billion euros), below the analyst consensus of $5.15 billion.

Analyst Reaction

• Rosenblatt analyst Barton Crockett maintained Spotify with a Neutral rating and lowered the price target from $703 to $679.
• Keybanc analyst Justin Patterson maintained Spotify with an Overweight rating and lowered the price target from $860 to $830.
• Benchmark analyst Mark Zgutowicz maintained Spotify with a Buy and lowered the price target from $840 to $800.
• Bank of America Securities analyst Jessica Reif Ehrlich maintained Spotify with a Buy and a price target of $900.

Rosenblatt: Crockett saw Spotify’s second-quarter 2025 results as mixed. On the positive side, the platform added 8 million Premium Subscribers (to 276 million) and 18 million Monthly Active Users (to 696 million), both well ahead of expectations.

However, revenue of 4.19 billion euros fell short of the 4.3 billion euros guidance, mainly due to foreign exchange impacts and higher-than-expected social charges tied to stock appreciation.

Operating income reached 406 million euros, below the 539 million euros forecast.

ARPU growth was softer than expected and is projected to remain flat in the third quarter as Spotify’s subscriber mix shifts toward lower-priced markets.

The analyst trimmed estimates slightly and lowered the price target based on a 35 times 2026 EV/EBITDA multiple.

Spotify guided for 5 million new subscribers and 4.2 billion euros in third-quarter revenue, again below consensus. Ad revenue grew 4.6% Y/Y in constant currency, missing estimates, but management noted ad growth could have reached 10% if not for cuts to unprofitable podcast deals.

Despite current softness, Crockett remained optimistic about long-term ad potential and expected pricing power, new content formats (like video podcasts and audiobooks), and share buybacks ($1.9 billion authorized) to support growth ahead.

Keybanc: Patterson stated Spotify as an increasingly attractive stock heading into 2026, supported by strong Premium Subscriber (+12% Y/Y) and MAU growth (+11% Y/Y), healthy pricing power, and the potential for ad revenue normalization.

While second-quarter revenue (4.19 billion euros) fell short due to FX headwinds and higher-than-expected social charges, core user metrics exceeded estimates, signaling solid product engagement, he noted.

The analyst trimmed 2025–2027 revenue and profit estimates due to weaker ad trends and FX, lowering the price target.

Still, Spotify’s large addressable market, expanding content portfolio (including audiobooks and video), and growing free cash flow—projected to double by 2027—support a favorable long-term outlook, Patterson noted.

While ad-supported execution remains a concern in 2025, the analyst expects reacceleration by 2026 as product upgrades gain traction.

Benchmark: Zgutowicz attributed Spotify’s recent stock dip to weak implied ARPU guidance and soft ad performance in the second-quarter.

While third-quarter premium ARPU is expected to be flat Y/Y due to lapping prior price hikes and geographic/product mix shifts, the analyst noted that modest sequential ARPU gains are anticipated in fourth-quarter.

He said that gross margin guidance (31.1%) came in slightly below consensus but aligned with expectations due to a known regulatory charge.

Ad-supported revenue declined 0.7% Y/Y, but adjusting for FX and the shift away from exclusive podcasts, growth was closer to 10%, Zgutowicz noted. Management acknowledged the need to accelerate ad monetization efforts, particularly through its Spotify Ad Exchange (SAX), which is expected to drive gains starting in 2026, he said.

The analyst lowered the 2025 revenue and earnings estimates, primarily due to FX and cautious ad outlooks, and trimmed the price target. Still, he remained bullish on long-term upside driven by pricing levers, podcast margin expansion, and a future Supremium tier.

Bank of America Securities: Spotify delivered a solid second-quarter, with monthly active users and subscribers exceeding forecasts and gross margin aligning with expectations, though revenue slightly missed due to FX headwinds, Ehrlich stated.

The analyst noted the stock’s pullback was driven by soft third-quarter gross margin guidance (31.1%), flat constant-currency ARPU growth, and ongoing ad monetization challenges.

Despite this, she remained bullish on Spotify’s long-term outlook, citing strong engagement, significant pricing power, and multiple monetization levers including new pricing tiers, better ad infrastructure, and growing audiobook and video businesses.

While 2025 is expected to be a transitional year for advertising, Ehrlich anticipated a reacceleration in 2026. Forecasts were modestly lowered for revenue and operating income, but free cash flow projections were raised to 2.88 billion euros. Ehrlich viewed the dip as a buying opportunity.

Price Action: SPOT stock traded higher by 5.06% to $651.40 on Wednesday.

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