Spotify Technology SA (NYSE:SPOT) shares fell around 6% in pre-market trading after the music streaming platform reported second-quarter 2026 results that missed Wall Street expectations, despite continued growth in subscribers and record gross margins.
While the company delivered solid user growth and issued stronger-than-expected revenue guidance for the current quarter, weaker earnings weighed on investor sentiment.
Earnings Fall Short of Expectations
Spotify reported adjusted earnings of €2.61 per share for the second quarter, below the analyst consensus estimate of €2.76.
Revenue totalled €4.78 billion, narrowly missing market expectations of €4.79 billion. Sales increased 14% from a year earlier, or 15% on a constant-currency basis.
Subscriber Growth Remains Strong
The company ended the quarter with 300 million Premium subscribers after adding a net 7 million users, outperforming its own guidance of 6 million additions.
Monthly active users rose 12% year over year to 777 million, reflecting net growth of 16 million users. However, that figure came in slightly below Spotify’s forecast of 17 million new monthly active users.
Record Margins Support Profitability
Spotify reported a record gross margin of 33.4%, an improvement of 193 basis points from the same period last year and above the company’s guidance of 33.1%.
Operating income reached €655 million, exceeding management’s forecast of €630 million, supported by stronger margins and lower social charges.
Free cash flow totalled €797 million during the quarter, bringing trailing 12-month free cash flow to €3.3 billion.
“Overall, we view the business as well positioned to deliver improved growth and margins in 2026 as we reinvest to support our long-term potential,” the company stated.
Third-Quarter Outlook Sends Mixed Signals
Looking ahead, Spotify forecast third-quarter revenue of €5.0 billion, ahead of the analyst consensus estimate of €4.93 billion.
However, the company expects operating income of €670 million, below market expectations of approximately €681.1 million.
Premium Business Continues to Drive Growth
Premium subscription revenue increased 15% year over year to €4.33 billion, supported by 9% subscriber growth and a 7% increase in Premium average revenue per user to €4.89.
Meanwhile, advertising-supported revenue rose 1% to €446 million, or 3% on a constant-currency basis, reflecting slower growth in the advertising segment compared with the company’s subscription business.
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