Spotify posts record quarterly gross margin as subscriber growth beats guidance

Spotify Technology S.A. reported third-quarter 2026 results on Thursday that beat the company's own subscriber and margin guidance, as the audio-streaming company continued a multiyear push to improve profitability while expanding into audiobooks, podcasts and AI-assisted listening tools. The results, filed with the U.S. Securities and Exchange Commission in a Form 6-K and published in full in the company's Q3 2026 shareholder update, showed the Stockholm-founded, Luxembourg-incorporated company still adding users faster than Wall Street had expected even as growth in some markets slows.

The numbers

Spotify ended September with 306 million Premium subscribers, up 9% from a year earlier and a net gain of 6 million in the quarter — one million more than the company had guided. Monthly active users reached 788 million, up 11% year over year, with the ad-supported free tier accounting for most of the growth: ad-supported listeners rose 12% to 499 million, according to the shareholder letter filed with the SEC.

Total revenue was €4.97 billion ($5.7 billion), up 16% year over year, or 14% at constant currency. Premium subscription revenue rose 17% to €4.49 billion as average revenue per user climbed 9.3% to €4.95, while advertising revenue grew 10% to €482 million. Gross margin reached 33.0%, up 136 basis points from a year earlier and, according to Music Business Worldwide, the highest gross margin the company has ever posted in a third quarter. Operating income was €672 million, also ahead of guidance.

Net income, however, fell to €518 million from €899 million in the same quarter last year, a drop the company and analysts attributed largely to a heavier tax charge and lower finance income rather than to any weakness in the underlying business. Free cash flow for the quarter was €735 million, bringing trailing twelve-month free cash flow to roughly €3.2 billion. For the fourth quarter, Spotify guided to 818 million monthly active users, 316 million Premium subscribers, revenue of €5.2 billion and operating income of about €820 million.

A strategy built on margin and breadth

The results land roughly nine months after Spotify restructured its top leadership. Founder Daniel Ek moved into the role of executive chairman at the start of this year, handing day-to-day control to two longtime lieutenants, Gustav Söderström and Alex Norström, who became co-chief executives. Thursday's update was the latest test of that arrangement, and both executives used it to argue the company's broader strategy — adding revenue streams beyond the core subscription — is working as intended.

Co-CEO Alex Norström said the subscriber and margin numbers reflected deliberate execution rather than a surprise, telling Variety that the business "keeps compounding" and that there is "more runway ahead."

"This was a quarter where we did what we said."

That quote, from Norström and reported by Music Business Worldwide, points to a string of product expansions the company leaned on this quarter: Creator Memberships, which let podcasters sell paid access directly to fans, rolled out to 34 markets; the Spotify Partner Program, which shares ad revenue with creators, expanded into more than 35 new markets; and audiobook access is set to expand from 22 markets to more than 180 by the end of the year.

Who the numbers touch

The growth was uneven by region. According to Music Ally's breakdown of the filing, Europe accounts for 36% of Premium subscribers, North America 25%, Latin America 24% and the rest of the world 15%, while listener growth is increasingly weighted toward markets outside Europe and North America, which together made up 38% of monthly active users, up from 36% a year earlier. That mix matters for artists, labels and podcast creators whose royalties and ad splits depend on where and how listeners engage with the platform.

A mixed reception

Coverage of the release noted a split scorecard. On a per-share basis, GAAP diluted earnings of roughly $2.79 came in below the analyst consensus of about $2.85, ending a run of several consecutive quarters in which Spotify had beaten Wall Street's profit estimate, even as revenue and subscriber additions topped expectations. Charges tied to employee stock compensation, which rise and fall with Spotify's share price, were cited as one reason the bottom line undershot forecasts despite the operating beat.

What comes next

Spotify's own guidance points to an acceleration in the current quarter, with a forecast 30 million net addition in monthly active users and 10 million more Premium subscribers by year-end, alongside a further step up in gross margin to 33.8%. The company is scheduled to hold an earnings call and live webcast at its investor relations site, where management is expected to field further questions on the durability of its margin gains and the pace of international subscriber growth heading into 2027.