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Spotify: Beyond Music—How New Verticals and AI Are Shaping the Next Earnings Phase!

Spotify’s recent earnings call highlighted both strong performance and notable challenges in the fourth quarter and throughout 2025. This discussion encapsulates an investment thesis that indicates cautious optimism mixed with careful consideration for future strategic moves. On the performance front, Spotify showcased impressive metrics. Total revenue grew by 13% to EUR 4.5 billion, driven by a 14% increase in premium revenue, largely attributed to subscriber growth. Advertising revenue climbed by 4%, indicating resilience in this segment despite macroeconomic headwinds. Gross Margin expanded to 33.1%, a year-on-year increase over 80 basis points, primarily due to favorable content costs. The operating income of EUR 701 million exceeded the company’s forecasts, further demonstrating strong operational efficiency. Cash flow generation also reached new highs, with free cash flow of EUR 834 million in the quarter, supported by a robust cash balance of EUR 9.5 billion.