Spotify disclosed on February 10 that its most experienced engineers have not written a single line of code since December, relying instead on an internal AI system built on Claude Code to handle all development work. Co-CEO Gustav Söderström revealed during the company's fourth quarter 2025 earnings call that developers now manage the entire coding process from their mobile devices during morning commutes - fixing bugs, adding features, and deploying updates before arriving at the office.

The streaming platform achieved record monthly active user growth of 38 million during the quarter ended December 31, reaching 751 million total users while generating €701 million in operating income. Premium subscribers grew 10% year-over-year to 290 million, while total revenue increased 13% on a constant currency basis to €4.5 billion. The disclosure highlights how artificial intelligence has fundamentally altered software development practices at one of the world's largest consumer technology companies.

Remote code deployment through messaging platform

"An engineer at Spotify on his morning commute, from Slack on his cell phone, can tell Claude to fix a bug and add a new feature to the iOS app," Söderström explained during the February 10 earnings call. "Once Claude finishes that work, the engineer gets a new version of the app pushed to him on Slack to test, so that he can then merge it to production - all before he's even arrived at the office."

The internal system, which Spotify calls "Honk," enables developers to instruct AI agents remotely using natural language commands through the company's messaging infrastructure. According to Söderström, AI partners have characterized Spotify's implementation as "industry leading." The platform represents a substantial departure from traditional software development workflows that required engineers to write, test, and deploy code manually through integrated development environments.

Söderström emphasized that Spotify's most senior engineers - the developers with the deepest technical expertise - have completely transitioned to AI-generated code supervised by human review. "When I speak to my most senior engineers, the best developers we have, they actually say that they have not written a single line of code since December," he stated. "They actually only generate code and supervise it."

The timeline coincides with the December 2024 release of Anthropic's Claude Opus 4.5 and Claude Code capabilities. Industry observers noted similar productivity shifts across technology companies following these releases, though few organizations have publicly disclosed complete transitions away from manual coding among senior engineering staff.

Financial performance exceeds guidance across metrics

Spotify exceeded guidance across all key performance indicators for the fourth quarter. The company added 38 million monthly active users versus guidance of 32 million, while premium subscriber net additions of 9 million surpassed forecasts by 1 million. Revenue matched guidance at €4.5 billion, representing accelerated 13% year-over-year growth on a constant currency basis.

Gross margin reached a record 33.1%, up 83 basis points year-over-year and exceeding guidance by 20 basis points. The ad-supported business showed signs of recovery, with revenue growing 4% year-over-year on a constant currency basis to €518 million after declining in previous quarters.

Operating income of €701 million exceeded forecast by €81 million, with social charges €67 million below expectations due to share price movements during the quarter. The company generated €834 million in free cash flow, bringing full-year 2025 free cash flow to €2.9 billion. Cash and short-term investments totaled €9.5 billion at quarter end.

Co-CEO Alex Norström framed 2025 as the "Year of Accelerated Execution" while positioning 2026 as the "Year of Raising Ambition." The company scheduled an investor day for May 21, 2026 in New York to detail longer-term strategic priorities. Spotify repurchased $433 million in shares during the quarter, bringing full-year 2025 repurchase activity to $510 million.

Advertising transformation progressing despite headwinds

Spotify's advertising business demonstrated improvement following challenges earlier in 2025. Ad-supported revenue grew 4% year-over-year on a constant currency basis, accelerating from flat growth in the third quarter. Excluding effects of podcast optimization strategies, the company achieved approximately 7% advertising growth.

Norström expressed confidence in the advertising transformation despite near-term execution challenges. "We now have record levels of advertisers on the platform," he stated. "And that increased density means much better yield and as a result, revenue growth for us." The company expects further advertising growth acceleration in the second half of 2026 as automated buying tools gain additional market adoption.

The platform launched its Spotify Ad Exchange in April 2025, enabling programmatic buying through real-time auctions. Partnerships with demand-side platforms including Google's Display & Video 360 and Magnite provide advertisers with enhanced targeting and measurement capabilities. The transformation required deep infrastructure changes, which Norström acknowledged created "pain" during the transition period.

Ad-supported monthly active users reached 476 million, growing 12% year-over-year. The ad-supported gross margin improved to 19.5%, up 441 basis points year-over-year, driven by enhanced contribution from podcasts and music. Norström indicated that while work remains, the company sees "very positive signs" in advertising performance trends.

Music industry payouts reach record $11 billion

Spotify distributed more than $11 billion to music rights holders during 2025, establishing a new record for annual payments from a single source to the music industry. Independent artists and labels accounted for half of all royalties paid. The cumulative total since Spotify's founding approached $70 billion.

"We paid out over $11 billion to the music industry in 2025 - the largest annual payment to music creators in history," Norström stated. The disclosure underscored Spotify's position as the dominant financial contributor to recorded music monetization globally. The company also facilitated over $1 billion in ticket sales by connecting fans with live shows through ticketing partnerships.

Video podcast consumption increased more than 90% since the January 2025 launch of the Spotify Partner Program. The platform now hosts more than 530,000 video podcast shows. The Partner Program distributed over $100 million to podcast publishers and creators globally during the first quarter 2025, with creator payouts growing 300% in January compared to the previous year.

Audiobooks in Premium expanded to Sweden, Denmark, Finland, Iceland, and Monaco during the quarter. Leading global publishers credited Spotify with attracting new listeners and driving double-digit audiobook growth. The company emphasized that audiobooks represent a substantial growth opportunity with significant market expansion potential remaining.

Wrapped campaign drives record subscriber intake

Spotify's annual Wrapped campaign delivered record engagement, with more than 300 million users participating and 630 million social media shares across 56 languages globally. The campaign marked the highest single day of subscriber intake in Spotify's history on day one of the December rollout.

"While we saw impressive engagement in 2024, we also got feedback on the user experience," Norström explained. "So this year, we turned up the dial." The 2025 implementation achieved 20% higher user engagement and 42% more social media shares compared to the previous year. The company emphasized that Wrapped serves as a critical user acquisition and retention mechanism.

Enhanced mobile free tier features launched globally during the third quarter contributed to the 38 million monthly active user additions in the fourth quarter. The improvements provide ad-supported users with expanded controls to search and play specific tracks and access songs shared by friends. These free tier enhancements supported the record MAU growth while strengthening the conversion funnel for premium subscriptions.

The company launched over 50 product features during 2025, including Prompted Playlist, Page Match for audiobooks, About This Song, mixing tools, and lossless audio streaming. Söderström characterized the innovation pace as demonstrating successful execution on ambitious product development goals.

AI agents enable natural language music discovery

Spotify positioned itself as building "the world's most intelligent, agentic media platform" through AI-powered features that enable natural language interaction. The company's AI DJ feature has been used by approximately 90 million subscribers, generating over four billion hours of engagement. The recently launched Prompted Playlist tool allows Premium users to create personalized playlists using natural language descriptions.

"If AI DJ is the chat interface to Spotify, where you can talk casually, Prompted Playlists is the Deep Research mode of Spotify," Söderström explained. "It lets you describe and set rules for your own personalized playlists - literally writing your own algorithm." The feature integrates users' complete Spotify listening history with real-time cultural trends from the internet.

The mixing tools reached 50 million created playlists with users making more than 1 million transitions daily. Söderström emphasized that these engagement patterns demonstrate users want to "actively participate in the music" rather than passively consume content. This behavioral shift creates datasets mapping natural language to music preferences that Spotify believes provides competitive differentiation.

"This is a very specific dataset," Söderström noted. "You may think it is a canonical dataset, meaning there is a factual answer to what is workout music. There is no factual answer to what is workout music. Taste is not a fact. It is an opinion." He emphasized that regional and individual variations in music taste preferences require hundreds of millions of listeners constantly providing feedback - data that cannot be commoditized through general large language models.

Developer productivity transformation raises questions

The complete transition away from manual coding among Spotify's senior engineers represents a significant departure from industry practices documented in recent research. A study published January 29, 2026 by Anthropic found that developers using AI assistance scored 17% lower on coding comprehension tests despite completing tasks slightly faster.

Söderström acknowledged that engineering practices "will change" and suggested the transformation "will be painful for many companies." He emphasized that Spotify has been preparing for AI-driven development "for at least one and a half years" and views the changes as creating opportunities rather than risks. "Software companies will start producing enormously more amount of software," he predicted.

The implementation allows developers to delegate complete coding tasks to AI agents while maintaining supervisory oversight. Research published January 5 found that 77% of professional developers rated their enjoyment working with agents as "pleased" or "extremely pleased" while consistently maintaining oversight of software design rather than delegating complete authority.

Söderström suggested that productivity gains enable Spotify to increase software output until "the limiting factor is actually the amount of change that consumers are comfortable with" rather than engineering capacity. The company shipped over 50 new features in 2025 and expects to accelerate development velocity further in 2026.

First quarter guidance projects continued growth

Spotify forecasted 759 million monthly active users for the first quarter 2026, implying net additions of 8 million. Premium subscribers are expected to reach 293 million, representing net additions of 3 million - within historical ranges for the seasonally smaller first quarter. Total revenue guidance of €4.5 billion represents improved growth of approximately 15% year-over-year versus the 13% achieved in the fourth quarter.

The company expects average revenue per user growth in the 5% to 6% range, supported by recent price increases. Gross margin is forecast at 32.8% with operating income of €660 million. Social charges are incorporated at €10 million based on the fourth quarter closing share price of $580.71.

Chief Financial Officer Christian Luiga indicated that both gross margin and operating margin are expected to improve throughout 2026, though quarterly progression may vary depending on investment timing in core product development and monetization initiatives. Free cash flow is projected to "meaningfully exceed" 2025 results while reflecting progression toward a normalized long-term tax rate.

Currency headwinds continue affecting reported results. The first quarter revenue outlook incorporates approximately 670 basis points of headwind compared to prior year exchange rates, versus the 580 basis points experienced in the fourth quarter. The strengthening dollar creates ongoing challenges for euro-denominated financial reporting.

AI music creation presents opportunities and challenges

Söderström outlined Spotify's perspective on artificial intelligence in music creation, identifying two distinct categories: artists making original music from scratch and new versions of existing music such as covers or remixes. The first category represents "a lot of net new music and more content than ever being delivered to Spotify," which Söderström characterized as beneficial because growing catalogs drive user acquisition, engagement, and fandom development.

"While the music may be generated on various AI platforms, the point is that regardless of where the music is made, the cultural moment always happens on Spotify," he stated. "That is where all music charts and finds an audience." The company's position centers on being the platform where music achieves cultural relevance rather than necessarily being the creation platform.

The second category - derivatives of existing music - represents an untapped monetization opportunity for artists. "In other media, like movies and TV, existing IP is incredibly valuable," Söderström noted. "But in music, artists haven't had a real way to monetize existing catalog through AI because the absence of a rights framework has kept AI mostly focused on net-new creation."

Spotify indicated it has developed technology and capabilities to enable derivatives "in a way that is additive for both IP rights holders and Spotify." The company emphasized working with artists rather than circumventing them. "Many artists and industry partners see this opportunity and we are already working with them on realizing it," Söderström stated.

The platform does not disclose what percentage of uploaded music is AI-generated but indicated it focuses on enabling creator choice about tools used. Spotify has implemented systems allowing creators and labels to include metadata about how music was created, which can be surfaced to listeners through features like About This Song.

Long-term strategy emphasizes technology platform identity

Daniel Ek, who transitioned from CEO to Executive Chairman effective with the fourth quarter results, emphasized three core principles for evaluating Spotify: solving problems at the intersection of consumers and creators, maintaining identity as a technology company first, and playing for long-term value creation.

"Today, what we've really built is a technology platform for audio - and increasingly, for all the ways creators connect with audiences," Ek stated. "The next wave of technology shifts - AI, new interfaces, wearables, new ways of interacting with content - these will reshape how people discover and experience audio and media."

Ek characterized Spotify's role as "the R&D arm for the music industry" and emphasized that the company's capabilities now extend far beyond music into podcasts, audiobooks, and emerging content formats. He highlighted long-term bets including the 2014 acquisition of Echo Nest for machine learning capabilities and the development of Spotify Connect for ubiquity across more than 2,000 devices from over 200 brands.

The leadership transition to co-CEOs Alex Norström and Gustav Söderström was characterized as emphasizing synchronized operations and deliberate planning. Both executives have been central to major platform shifts including mobile, subscriptions, machine learning, podcasts, and audiobooks. "They didn't inherit Spotify. They helped build it," Ek stated.

Operating expenses declined 10% year-over-year in the fourth quarter, though excluding currency movements and social charges, expenses increased approximately 13% driven primarily by marketing and personnel costs. The company employed 7,323 full-time employees globally at quarter end. Management emphasized that reinvestment in the business remains the primary capital allocation priority while share repurchases address dilution.

Timeline

Summary

Who: Spotify Technology S.A. announced fourth quarter 2025 earnings affecting 751 million monthly active users, 290 million Premium subscribers, and 7,323 employees globally. Co-CEOs Alex Norström and Gustav Söderström led the earnings call following Daniel Ek's transition to Executive Chairman.

What: The streaming platform disclosed that senior engineers stopped writing code manually in December 2025, using only AI-generated code through an internal system called Honk built on Claude Code. Spotify achieved record quarterly user growth of 38 million MAU, €701 million operating income, and €4.5 billion revenue growing 13% year-over-year on a constant currency basis. The company paid $11 billion to music rights holders during 2025.

When: Results cover the quarter ended December 31, 2025, announced February 10, 2026. The transition to AI-only coding occurred in December 2025 following the release of Claude Opus 4.5. First quarter 2026 guidance projects continued growth across user and financial metrics.

Where: Spotify operates globally with 751 million monthly active users across all regions demonstrating year-over-year and quarter-over-quarter growth. The company employed 7,323 full-time employees at quarter end and maintains €9.5 billion in cash and short-term investments.

Why: The AI coding implementation aims to accelerate software development velocity beyond human capacity constraints. Management positioned the technology transformation as essential for maintaining competitive advantage as artificial intelligence reshapes media platforms. The company believes its technology platform identity, combined with logged-in user data and established business models in subscriptions and advertising, position it favorably to benefit from AI disruption rather than face displacement risks.

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