Spotify Reports Premium Subscribers Increased 12 Percent

Spotify Technology S.A. released its Q1 2025 earnings report Tuesday, before the market opened, highlighting strong performance across key metrics, including record-high operating income and significant subscriber growth.

Key Highlights from Spotify’s Q1 2025 Earnings:

• Subscribers: Premium subscribers grew by 12% year-over-year (Y/Y) to 268 million, surpassing analyst expectations of 265.22 million. This marked the highest Q1 net subscriber additions since 2020.
• Monthly Active Users (MAUs): MAUs increased by 10% Y/Y to 678 million, slightly below the estimated 679.04 million.
• Revenue: Total revenue rose 15% Y/Y to €4.19 billion, narrowly missing the consensus estimate of €4.21 billion.
• Gross Margin: Improved by approximately 400 basis points Y/Y to 31.6%, slightly ahead of the company’s forecast of 31.5%.
• Operating Income: Reached a record high of €509 million, reflecting significant profitability improvements.
• Earnings Per Share (EPS): Reported at €1.7, below the estimated €2.2, indicating a miss on earnings expectations.

Insights

• Subscriber Growth: The strong subscriber growth was driven by Spotify’s freemium model, which allows users flexibility, and high retention rates despite economic uncertainty. CEO Daniel Ek emphasized healthy engagement and retention as key drivers.
• Macro Environment: Ek noted potential short-term “noise” due to macroeconomic uncertainty but expressed confidence in Spotify’s long-term trajectory.
• Product Initiatives: Spotify highlighted expansions like the Spotify Partner Program and Concerts Near You, aimed at enhancing value for artists, fans, and creators.
• Advertising Revenue: Advertising, which accounts for about 12% of revenue, faced potential pressure from a weak macro environment, as noted by analysts.

The Outlook

Music subscriptions are seen as a relatively cheap utility, making Spotify’s business somewhat recession-proof, compared with its tech and media peers.  

“The underlying data at the moment is very healthy,” said Chief Executive Daniel Ek, pointing to strong engagement and retention—and the option of Spotify’s free tier for customers who may feel the squeeze. “So yes, the short term may bring some noise, but we remain confident in the long-term story,” he said. 

For the current quarter, Spotify forecast user numbers would grow to 689 million—below Wall Street expectations—and premium subscribers would grow to 273 million, ahead of analyst estimates, according to FactSet. It said it expects revenue of €4.3 billion and gross margin of 31.5%.