Spotify Technology S.A.: Strong User Growth Offset by Soft Financial Guidance
August 4, 2025 – Spotify Technology S.A. has reported robust growth in user metrics for the first half of 2025, yet the company’s financial outlook remains cautious amid certain operational challenges, according to the latest analysis by Phillip Securities Research Pte Ltd.
Solid User Engagement and Subscriber Growth
Spotify’s monthly active users (MAUs) increased to 696 million, marking an 11% year-on-year rise, aligning with the company’s previous guidance. Premium subscribers grew strongly as well, reaching 276 million, which represents a 12% increase compared to the prior year. These figures highlight Spotify’s continued appeal and its expanding global reach in the highly competitive music streaming market.
Additionally, margins have shown improvement across both the premium subscription segment and the ad-supported services, suggesting operational efficiencies are beginning to take effect.
Financial Results: Revenue and Profitability Behind Expectations
Despite the encouraging user trends, Spotify’s second quarter 2025 results fell short of expectations. Revenue and adjusted profit after tax and minority interests (PATMI) were impacted primarily by execution delays related to scaling the company’s advertising capabilities.
For the first half of 2025, revenue and adjusted PATMI accounted for only 45% and 30%, respectively, of Phillip Securities’ full-year 2025 forecasts, signaling challenges in monetization and cost management.
Soft Guidance for Third Quarter and Near-Term Outlook
Looking ahead, Spotify’s guidance for the third quarter of 2025 expects revenue growth to be around 5% year-on-year, considered soft by investors. The tempered outlook stems from planned near-term investments aimed at strengthening the company’s platform and advertising infrastructure.
Additionally, the company faces elevated operating costs and currency headwinds, likely to weigh on profits in the short term.
Analyst’s Perspective and Investment Recommendation
Phillip Securities Research has maintained its full-year revenue estimates for Spotify but lowered the 2025 adjusted PATMI forecast by 12% to factor in additional social charges linked to recent share price appreciation.
The firm’s discounted cash flow (DCF) valuation model maintains a target price of US$600 per share. Reflecting the company’s mixed performance, the recommendation has been upgraded from “Reduce” to “Neutral,” buoyed by solid user and subscriber growth but offset by cautious near-term financial expectations.
Conclusion
Spotify continues to demonstrate strong user engagement and subscription growth, reinforcing its leadership in music streaming. However, delays in scaling its ad capabilities, coupled with significant investments and operational costs, have moderated expectations for profitability in the near future. Investors are advised to consider these dynamics when evaluating Spotify’s stock.
About Phillip Securities Research
Phillip Securities Research Pte Ltd is a licensed financial adviser in Singapore offering in-depth analysis and reports on equities and market sectors. Their research is based on publicly available information and is intended for informational purposes only. Investors should conduct their own due diligence or consult professional advisers when making investment decisions.
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