Spotify Technology has forecast fourth-quarter profits surpassing Wall Street estimates, driven by subscriber growth and investment in artificial intelligence (AI) to enhance user experience. The Swedish music streaming service reported a 2 percent increase in paying subscribers during the third quarter, reaching 306 million, exceeding analysts’ expectations. Total monthly active users also rose 1 percent quarter-over-quarter, totaling 788 million.
The company projects operating income of €820 million (£686 million) for the fourth quarter, slightly above the average analyst estimate of €813.4 million. Spotify expects its premium subscriber base to grow by approximately 10 million in the quarter, reaching 316 million, also exceeding forecasts of 314.7 million. Following the announcements, Spotify’s shares increased by 9.8 percent to $576.83 in early trading in New York.
Spotify has introduced several AI-driven features aimed at personalizing the listening experience. These include AI DJ, which creates customized music mixes with spoken commentary, and prompt-based playlists that generate song selections based on user-described moods or preferences. Additionally, users can interact with an AI agent within the app, capable of navigating their listening history, selecting favourite tracks, sorting them by musical elements like key and tempo, and combining them into continuous playlists at preferred paces.
The AI functionalities extend to generating individual podcasts, summarizing audiobooks up to the user’s last listening point, and providing detailed credits on who contributed to each track element. Spotify’s AI is integrated with platforms like ChatGPT, Meta Ray-Bans, OpenAI’s Dots, and Meta’s Muse.
Gustav Soderstrom, co-chief executive of Spotify, emphasized the company’s strategy for an “agentic age,” wherein multiple AI agents will interact with consumers. He expressed confidence that Spotify will be the leading media platform for licensed content across these agents, making music, audiobooks, and podcasts readily accessible and easy to create.
Spotify recently secured a licensing agreement with music distributor Believe for a forthcoming paid tool allowing Premium users to create fan-made AI covers and remixes. The firm has also made similar arrangements with Universal Music Group, Merlin, and Kobalt. Meanwhile, Spotify continues to expand its audiobook offerings into new markets including Spain, Mexico, and Norway. Soderstrom noted that while audiobooks nearly match music’s popularity in Sweden—where about 50 percent of the population subscribes—the global figure is under 4 percent, with higher rates of 20 to 25 percent in markets like the UK and Germany.
In the third quarter, Spotify’s revenue rose 16 percent year-over-year to €4.97 billion, narrowly missing analysts’ consensus of €4.98 billion. Operating income increased by 15 percent to €672 million. The company indicated that growth in operating expenses peaked in the third quarter and is expected to moderate from the fourth quarter through 2027.
Market analysts remain optimistic about Spotify’s prospects. BofA Securities maintained a “buy” rating with a $685 price target, highlighting potential profit growth from price adjustments, new subscription tiers, and advertising improvements. Jeff Wlodarczak, CEO and analyst at Pivotal Research Group covering AI, internet, and media sectors, acknowledged previous cautiousness on AI’s near-term impact, noting that current results have not shown any adverse effects so far.