SPOT · Spotify Technology S.A.

Spotify’s Q1 2026 performance reflects broad-based operational execution and structural margin improvement. Revenue growth accelerated to 8% Y/Y (14% constant currency), driven by 10% Premium revenue growth — itself fueled by 9% Y/Y subscriber growth and flat ARPU in EUR terms (up 5.7% constant currency) — while Ad-Supported revenue declined 5% Y/Y due to higher music and engagement-related costs, partially offset by podcast sponsorship gains and automated ad channel strength. Gross margin expanded 133 bps Y/Y to 33.0%, the highest Q1 on record, with Premium segment gross margin rising 129 bps to 34.8% — reflecting disciplined cost management across music licensing, audiobooks, and video podcasts — whereas Ad-Supported gross margin fell 102 bps to 13% due to cost inflation from elevated user engagement. Operating income of €715 million significantly exceeded guidance (€660 million), aided by €49 million lower Social Charges than forecast — a non-operational, share-price-dependent variance that management explicitly excludes from forward planning. Marketing, cloud, and AI spend increased year-over-year, but were more than offset by gross margin strength and expense discipline. Free cash flow hit a record €824 million, supported by improved net working capital and higher net income, contributing to €3.2 billion in trailing 12-month free cash flow and a robust €8.8 billion liquidity position. The company also executed €306 million in share repurchases and retired €1.3 billion in exchangeable notes during the quarter — underscoring confidence in sustained cash generation and balance sheet flexibility. Management reiterated long-term reinvestment priorities in AI personalization (Taste Profile, Prompted Playlist), music insights (SongDNA, About the Song), and audiobook discovery (Audiobook Charts), positioning for continued growth and margin expansion in 2026.