GET DAILY SIGNALSSpotify (SPOT) Shows Steady Growth and Record Margins in Q3 Despite EPS Miss
Key Takeaways
- Spotify reported third quarter 2026 revenue of €4.97 billion (about $5.6 billion), up 16% year over year, roughly in line with analyst expectations.
- Premium subscribers grew 9% to 306 million, one million above company guidance, while monthly active users (MAUs) rose 11% to 788 million.
- Gross margin expanded to a record 33.0%, up roughly 136 basis points from a year earlier and above guidance.
- Diluted earnings per share (EPS) came in at €2.48, below consensus estimates of about €2.80, as operating expenses rose 26% year over year.
- The company guided for Q4 revenue of €5.2 billion, 316 million subscribers, and operating income of €820 million, signaling continued momentum.
Why This Quarter Matters for Spotify
Spotify operates the world's largest audio streaming platform, covering music, podcasts, and audiobooks, with a growing advertising business alongside its subscription model. This report stands out because investors want to see whether the company can expand its user base while turning that scale into better margins and cash flow. After missing estimates last quarter, Spotify faced pressure to show durable subscriber gains and better cost control. The results also highlight its push into artificial intelligence features and broader audiobook availability, serving as an important marker on the path to sustained profitability.
Breaking Down the Reported Results
For the third quarter ended September 30, 2026, Spotify posted total revenue of €4.97 billion, up 16% year over year (14% on a constant currency basis). Premium revenue increased 17% to €4.49 billion, while ad-supported revenue rose 10% to €482 million, an improvement from the roughly 3% growth seen in the first half of the year.
Monthly active users reached 788 million, up 11% year over year and matching guidance. Premium subscribers grew 9% to 306 million, beating the company's guidance by one million, with gains across regions. Premium average revenue per user climbed 9.3% to €4.95.
Profitability metrics strengthened. Gross margin reached a record 33.0%, expanding about 136 basis points year over year and topping the 32.9% guidance. Operating income rose 15% to €672 million for a 13.5% operating margin, slightly ahead of expectations. That said, net income declined to €518 million from €899 million a year earlier, and diluted EPS was €2.48 versus the roughly €2.80 analysts had projected, reflecting a 26% rise in operating expenses tied to marketing, cloud, and AI investments. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
How the Market Reacted
Shares of SPOT climbed sharply in premarket trading after the release, rising roughly 5% to 9% as investors focused on subscriber growth, the record gross margin, and faster advertising revenue rather than the EPS shortfall. The stock had fallen about 6% for the year leading into the report, which helped set up a relief rally. Sentiment improved on management's comments about "durability at scale," noting consistent annual subscriber additions of 25 million or more since the 2018 IPO. A renewed multiyear deal with podcaster Joe Rogan and plans to expand audiobooks into more than 180 markets supported the view of a broadening, better-monetized platform.
What to Watch Going Forward
Spotify guided for fourth-quarter revenue of €5.2 billion, implying about 15% growth, along with a gross margin of 33.8% and operating income of €820 million. It expects monthly active users to reach 818 million and premium subscribers to hit 316 million, pointing to net additions of roughly 30 million and 10 million, respectively.
Several areas deserve attention in upcoming quarters. Advertising growth remains key, as management anticipates a return to double-digit gains after an extended stretch of single-digit increases. Margin trends also matter, with the company noting that operating expense growth is moderating and should ease further into 2027.
Investors will want to track the global audiobook rollout and the ongoing rollout of AI-powered features, which involve near-term costs but sit at the center of long-term plans. Capital allocation is another point of interest, with $1.1 billion in share repurchases completed year to date through October 21, offsetting dilution from equity programs. The balance sheet looks solid, with roughly €9.9 billion in cash and cash equivalents and no debt beyond lease liabilities.
Using AI Tools to Refine Research
In my own analysis process, I turn to Tickeron's AI Screener when evaluating names like Spotify alongside peers. It lets me apply filters for technical patterns, fundamentals, trends, and AI signals across thousands of stocks and ETFs, which helps surface ideas more efficiently than manual reviews. This approach supports a more structured way to compare opportunities without replacing core fundamental work.
Disclaimer
The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
SPOT's Indicator enters downward trend
The Aroon Indicator for SPOT entered a downward trend on October 14, 2026. Tickeron's A.I.dvisor identified a pattern where the AroonDown red line was above 70 while the AroonUp green line was below 30 for three straight days. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options. A.I.dvisor looked at 185 similar instances where the Aroon Indicator formed such a pattern. In 149 of the 185 cases the stock moved lower. This puts the odds of a downward move at 81%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In 35 of 65 cases where SPOT's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are 54%.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SPOT declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 66%.
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where SPOT's RSI Indicator exited the oversold zone, 24 of 29 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are 83%.
The Momentum Indicator moved above the 0 level on October 07, 2026. You may want to consider a long position or call options on SPOT as a result. In 74 of 87 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 85%.
The Moving Average Convergence Divergence (MACD) for SPOT just turned positive on October 08, 2026. Looking at past instances where SPOT's MACD turned positive, the stock continued to rise in 45 of 54 cases over the following month. The odds of a continued upward trend are 83%.
SPOT moved above its 50-day moving average on October 20, 2026 date and that indicates a change from a downward trend to an upward trend.
The 10-day moving average for SPOT crossed bullishly above the 50-day moving average on October 19, 2026. This indicates that the trend has shifted higher and could be considered a buy signal. In 10 of 12 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are 83%.
Following a +3.16% 3-day Advance, the price is estimated to grow further. Considering data from situations where SPOT advanced for three days, in 276 of 352 cases, the price rose further within the following month. The odds of a continued upward trend are 78%.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is 23 (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is 49 (best 1 - 100 worst), indicating steady price growth. SPOT’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is 54 (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 94, placing this stock slightly better than average.
The Tickeron Valuation Rating of 83 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: SPOT's P/B Ratio (12.880) is slightly higher than the industry average of (0.987). P/E Ratio (32.349) is within average values for comparable stocks, (-53.765). Projected Growth (PEG Ratio) (1.407) is also within normal values, averaging (17.274). Dividend Yield (0.000) settles around the average of (0.985) among similar stocks. P/S Ratio (5.491) is also within normal values, averaging (71.888).
The Tickeron PE Growth Rating for this company is 96 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
a music platform
Industry InternetSoftwareServices
Advertisement