Spotify Technology S.A. 2026 Q3 Earnings Call

All right. Thanks, operator, and welcome to Spotify's third quarter 2026 earnings conference call. Joining us today will be our Co-CEOs, Alex Norström and Gustav Söderström, and our CFO, Christian Luiga. We'll start with opening comments from the team, and afterwards, we'll be happy to answer your questions. Questions can be submitted by going to slido.com, S-L-I-D-O dot com, and using the code hashtag SpotifyEarningsQ326. Analysts can ask questions directly into Slido, and all participants can then vote on the questions they find the most relevant. If for some reason you don't have access to Slido, you can email investor relations at ir@spotify.com, and we'll add in your question. Before we begin, let me quickly cover the Safe Harbor. During this call, we'll be making certain forward-looking statements, including projections or estimates about the future performance of the company.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed on today's call, in our shareholder deck, and in filings with the Securities and Exchange Commission. During this call, we'll also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures can be found in our shareholder deck, in the financial section of our investor relations website, and also furnished today on Form 6-K. With that, I'll turn it over to Alex.

Thank you, Bryan, and hello, everyone. Thanks for joining us. Let me just start with the strength of the quarter. We made several commitments last quarter, and they've all landed either in line or better than expected. Our revenue came in right in line with what we guided at about EUR 5 billion, up 14% at constant currency. MAU also landed right on target at 788 million. As we shared last quarter, we're optimizing our MAU growth across markets to scale our funnel and drive revenue growth over time. Subscribers came in ahead at 306 million, beating our guidance by 1 million. That strength shows up where it matters the most. Premium revenue grew 15%, driven by both subscriber growth and higher ARPU. Gross margin also came in ahead of expectations at 33%. This is a significant year-over-year expansion.

Over the past 12 months, we've generated EUR 3.2 billion in free cash flow. Ads is one of the areas of our business that I've spent time talking about, so I want to share our progress. We've been open with you that we're rebuilding this business, and we said the momentum would start to show in the second half of the year. In Q3, Ads grew 9% at constant currency, up from the 3% in each of the first two quarters. Further, our automated channels continue to scale, and sponsorship products are growing, particularly in podcasts. We're moving in the right direction and there's more progress ahead. On OpEx, we told you this would be a year of investment, with operating expense growth peaking in Q3 and then moderating from Q4 and on. That's exactly what's happening. Christian Luiga will walk you through the details further, but as we know from experience, investing in our product, features, and brand strengthens our position, and we can see that playing out right now.

To build on this further, I'd like to use the rest of my time on what I think is an underappreciated part of our story: durability. When we went public in 2018, we had 71 million subscribers. Since then, every single year, we've been adding 25 million subs or more. This year, we expect to reach 316 million subscribers. As I've mentioned before, very few consumer subscription businesses have ever reached this scale and few are still adding at this pace. Through a pandemic, price increases, and a changing economy and consumer landscape, this steady growth in subscribers hasn't stopped. This quarter, that growth came from every region. That's what durability looks like.

Looking across the broader subscription landscape, you all know that not all subscribers are created equal. Spotify not only enjoys industry-leading engagement, but we also have the most passionate and engaged music, podcast, and book fans in the world on our platform. We're not just an app or a product sitting on a phone, and that's why we continue to grow and take share. Every time we expand what's on Spotify, we bring in new listeners, and we give existing ones more reasons to come back, almost every day. Sweden is a clear demonstration of how high the opportunity can go. In our first and most established market, nearly 50% of the population pays for Spotify. Globally, that figure is still under 4%, and in key markets like the U.K. and Germany, it's between 20% and 25%.

Latin America is around 11%, and then across emerging markets, we're less than 3%. What makes our position unique is how balanced it is. In developed markets, we're growing a highly engaged monetizing base with a lot more room for growth. In emerging markets, we're still early, with hundreds of millions of subs to come. This is a growth engine that compounds, building a bigger recurring revenue base. This is durability at scale. We also kept adding to what a subscription is worth this quarter. We signed a new multi-year agreement with Joe Rogan, whose show remains the world's most popular podcast. We added Believe and TuneCore as a partner for remixes and covers. Remixes are as old as music itself, and we're working on a version that fans love and rights holders trust, with consent, credit, and compensation at the core.

And as we've recently announced, we are expanding audiobooks to more than 180 markets by the end of the year, making Spotify the world's first global audiobook service. This enhances subscriber lifetime value, add-on monetization, and will benefit Spotify around the world. Gustav will share more about this. This was a quarter where we did what we said. We've built a strong business that keeps compounding. We invest when we see a path for growth, our costs are moderating, and there's more runway ahead. And having seen a preview of this year's Wrapped, I'm really looking forward to Q4 with a lot of excitement, and I can't wait to see how our fans respond. With that, let me hand it over to Gustav.

Thank you, Alex. Alex just spoke about durability at scale, and I want to share how we're creating that. At a recent Investor Day, I talked about two ways to predict the future. You can extrapolate what is already happening, or you can anticipate what's about to change. And when the world shifted to mobile in 2007, we needed to do a lot of anticipation, imagining and building for a world that we thought would happen, but that didn't exist yet. This worked out well for us, and we accelerated in that new world. For much of the following decade, we, and everyone else, could instead largely rely on extrapolation of what already existed. That would be more phones, more ads, more catalog, et cetera, which also got us very far.

I don't think it's escaped anyone on this call, but today we are clearly in an era where anticipation is much more important again. Today, I want to talk about three things that we anticipated some time ago that are now becoming real, and the effects of those. First up is agents. On our fourth quarter call back in February, I said that we were building the world's first truly intelligent agentic media platform. That may have sounded a little bit abstract at the time, but it's hopefully becoming clearer now. What we meant was an intelligent media service encapsulated as an agent, whether you use it directly through our application or via another agent. We made a bet that consumers using services like ChatGPT would also start demanding intelligence from their media service. We built for that. Spotify is now an agent that you can not only click on in our app, but talk to, ask questions of, and instruct.

We can do things today that no other media services can do. For example, you can ask Spotify to go through your listening history song by song back to 2008, picking your true favorites, beat-stretching them by speeding them up or down, and then sorting them by key and BPM. Then you can ask it to mix them together into the perfect running playlist at your exact cadence. But that's not all you can do. You can also ask Spotify exactly who wrote and performed what on each track. And if you want to shift gears entirely, we can also generate an individual podcast just for you, as well as recap the book you're reading up until exactly where you stopped.

As we prepared for this agentic world, we also thought through what our ubiquity strategy would mean in an agentic age. Spotify's strategy has always been to be the best experience wherever people listen. As an example, nearly a decade ago, as connected speakers took off, we rebuilt our entire technology stack to make Spotify very easy to integrate across speakers, something called the eSDK. TVs, gaming consoles, and other devices. That investment turned the growth of the connected device industry into a tailwind for Spotify, one that actually continues to pay off even today. For the agentic age, we are betting on consumers using many agents, and that Spotify will be by far the best media platform for licensed content inside and across all these agents. Before most people were regular users, we integrated Spotify into ChatGPT, making Spotify the first service available.

This was also the case with Meta Ray-Bans, OpenAI's Dots, and we were the only media service integrated into Meta's Muse at launch. The list goes on and on. We are simply everywhere. So that whenever you find a great song, a book, or a podcast, or even want to create a podcast of your own, it's right there. You just save it, playlist it, and it shows up in Spotify in your morning commute. Importantly, this is not just a technology strategy. It's also a business strategy. We think Spotify is unusually well-positioned for the age of agentic AI. This is because Spotify, unlike most companies, can monetize from the background. Whether you're a Premium user or a free user listening to our audio ads, our business model not only works but thrives while Spotify is in the background. This is actually not something new.