Spotify Technology NYSE: SPOT reported third-quarter 2026 results that met or exceeded its guidance across revenue, monthly active users, subscribers, gross margin and operating income, while executives highlighted improving advertising growth, expanding audiobook availability and continued investment in artificial intelligence-driven features.
Co-CEO Alex Norström said revenue totaled about €5 billion, rising 14% year over year on a constant-currency basis and landing in line with the company’s forecast. Monthly active users reached 788 million, also in line with guidance, while Premium subscribers rose to 306 million, one million above the company’s outlook.
Premium revenue increased 15% on a constant-currency basis, supported by 9% subscriber growth and a 7.5% increase in average revenue per user, according to CFO Christian Luiga. Gross margin reached 33%, exceeding guidance by 10 basis points and expanding about 140 basis points from the prior year.
“We made several commitments last quarter, and they’ve all landed either in line or better than expected,” Norström said.
Advertising Growth Accelerates
Spotify’s advertising business grew 9% in the third quarter on a constant-currency basis, accelerating from 3% growth in each of the first two quarters of the year. Norström said the improvement was driven by progress in rebuilding the company’s advertising technology and sales infrastructure, including growth in automated channels and podcast sponsorship products.
Luiga said automated biddable advertising represented 40% of the ad business and was a key contributor to the recovery. Spotify expects to continue progressing toward double-digit ad-supported revenue growth in the fourth quarter.
“It’s much better to have 10% revenue growth or above than having a low single-digit growth,” Luiga said when discussing the potential contribution of advertising to total company growth over time.
Norström said Spotify’s advertising opportunity remains supported by its brand, licensed content and listener engagement. The company is working to make its inventory easier to purchase through automation, improve advertiser measurement and simplify the creation of audio advertisements, he said.
Profitability, Cash Flow and Buybacks
Operating income was €672 million, above the company’s guidance, producing an operating margin of 13.5%. The quarter included €22 million in social charges related to share-price movements, which were €13 million higher than Spotify had forecast.
Free cash flow totaled €735 million for the quarter, including unfavorable timing effects related to working capital and cash taxes. Over the past 12 months, Spotify generated €3.2 billion in free cash flow, Norström said.
Spotify had $9.9 billion in cash and cash equivalents at the end of the quarter and no debt other than lease liabilities. Through Oct. 21, the company had repurchased 2.2 million shares for $1.1 billion, Luiga said. The purchases offset dilution from employee equity programs and marked the beginning of returns of excess cash to shareholders.
Since resuming repurchases in August 2025, Spotify has bought back about 3 million shares, or roughly 1.5% of shares outstanding. Executives said the company’s capital-allocation priorities remain organic investment, selective acquisitions and opportunistic shareholder returns.
AI Features, Agent Integrations and Product Expansion
Co-CEO Gustav Söderström said Spotify is positioning itself for what he described as an “agentic” AI environment, in which users can interact with media services through AI assistants. He said Spotify has integrated with services and devices including ChatGPT, Meta Ray-Bans and Meta’s Muse.
Söderström emphasized that Spotify retains the listening experience and does not send its music catalog or user data to third-party agents. Instead, he said, external agents can interact with Spotify, which then uses its own data and recommendation capabilities to determine playback and content recommendations.
The company said its AI investments have helped accelerate product development without increasing headcount. Söderström said Spotify is seeing double-digit gains in content discovery from early deployments of its large taste model, while users are spending more time in selected algorithmic experiences.
Spotify also cited adoption of interactive music features. Nearly 40 million Premium users listen to mixed playlists, Söderström said, with consumption of those playlists up 90% quarter over quarter. The company said user-generated mixing activity provides additional signals that can improve recommendations and its AI capabilities.
Meanwhile, Spotify plans to expand audiobooks to more than 180 markets by year-end, up from 22 markets. Norström said the company has seen audiobook listenership increase 40% over the prior three years and believes the category can increase active days, retention and customer lifetime value. The company also plans to expand its Spotify Partner Program to 35 additional markets during the fall and recently introduced Creator Memberships, allowing fans to support creators directly in exchange for member-only experiences.
Fourth-Quarter Outlook
For the fourth quarter, Spotify forecast 818 million monthly active users, representing an increase of 30 million from the third quarter, and 316 million Premium subscribers, a net increase of 10 million.
The company expects fourth-quarter revenue of €5.2 billion, with year-over-year ARPU growth of roughly 4.5% to 5%. The forecast reflects recent price increases and performance from Audiobooks+ add-ons, partly offset by the comparison with prior-year pricing actions in more than 150 markets.
Spotify expects a fourth-quarter gross margin of 33.8%, about 70 basis points above the prior-year period, even as it funds the global audiobook expansion and broader availability of the Spotify Partner Program. For the full year, the company’s outlook implies gross-margin expansion of approximately 130 basis points compared with 2025.
Spotify forecast fourth-quarter operating income of €820 million. Luiga said operating-expense growth is expected to moderate meaningfully starting in the fourth quarter and continue declining into 2027, though the company did not provide formal 2027 guidance.
About Spotify Technology (NYSE:SPOT)
Spotify Technology SA is an audio streaming company that operates the Spotify platform, offering users access to music, podcasts and audiobooks through internet-connected devices. Its catalog includes licensed recordings from music labels and artists, as well as podcasts and other audio content from creators and publishers.
Spotify provides both an ad-supported service and subscription-based Premium plans. Premium subscribers generally receive ad-free listening and additional features, while the advertising-supported service allows users to access content without a paid subscription.
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