Spotify surpasses 700 million users with €582M operating income in Q3

Spotify reported third quarter 2025 earnings on November 4, demonstrating sustained user growth alongside contrasting performance between subscription and advertising revenue segments. The streaming platform surpassed 700 million monthly active users while achieving €582 million in operating income, though ad-supported revenue continued facing headwinds.

Monthly active users reached 713 million in the quarter ended September 30, growing 11% year-over-year from 640 million, according to the shareholder deck. Premium subscribers climbed 12% annually to 281 million, adding 5 million net subscribers during the quarter. Ad-supported MAUs expanded 11% to 446 million users.

Total revenue increased 12% year-over-year on a constant currency basis to €4.3 billion, though reported growth registered 7% due to unfavorable foreign exchange movements that created approximately 450 basis points of headwind. Premium revenue rose 9% as reported to €3,826 million, or 13% excluding currency effects, driven by subscriber gains offsetting a 4% year-over-year decline in average revenue per user to €4.53.

The ad-supported segment presented persistent challenges. Revenue from advertising declined 6% year-over-year to €446 million, though the company reported flat performance on a constant currency basis. Growth in music and podcast advertising impressions sold was offset by pricing softness and optimization of the owned and licensed podcast portfolio, according to the earnings documents.

"The business is healthy. We're shipping faster than ever. And we have the tools we need – pricing, product innovation, operational leverage, and eventually the ads turnaround – to deliver both revenue growth and profit expansion," said Daniel Ek, Spotify's founder and CEO, in the November 4 announcement.

Financial performance exceeds guidance

Spotify delivered results that met or exceeded guidance across all key performance indicators in the third quarter. The platform added 17 million monthly active users versus guidance for 14 million, while subscriber net additions of 5 million aligned with expectations.

Gross margin finished at 31.6%, exceeding the 31.1% guidance by 50 basis points. This represented a 53 basis point improvement year-over-year, driven primarily by gains in the ad-supported segment where gross margin reached 18.4%, up 525 basis points annually. Premium gross margin declined 34 basis points to 33.2%, reflecting video podcast costs previously attributed to the ad-supported segment, partially offset by revenue growth outpacing music costs net of marketplace programs and audiobook expenses.

Operating income of €582 million surpassed the €485 million forecast, reaching a 13.6% operating margin. The variance reflected lower-than-expected social charges driven by share price movements during the quarter, alongside favorability in marketing and personnel-related costs. Social charges—payroll taxes tied to share-based compensation in select countries—came in €41 million below forecast at negative €16 million due to stock price fluctuations.

Operating expenses declined 2% year-over-year to €769 million. Excluding currency movements and social charges, operating expenses increased approximately 11%, driven by higher marketing spend from campaign timing and increased personnel costs partly reflecting shifts in annual equity grant timing. The workforce totaled 7,323 full-time employees globally at quarter end.

Free cash flow reached €806 million in Q3, a record for any third quarter, driven by higher net income adjusted for non-cash items partially offset by working capital movements. Capital expenditures rose €19 million year-over-year to €23 million. Last twelve month free cash flow expanded to €2.9 billion, supporting a balance sheet with €9.1 billion in cash, cash equivalents, restricted cash and short-term investments.

The company repurchased $77 million in shares during Q3, bringing year-to-date repurchases through November 3 to $410 million.

Advertising transformation faces execution challenges

The ad-supported revenue decline of 6% year-over-year (flat constant currency) occurred despite the platform growing its addressable audience to 446 million users. This represented the continuation of advertising business challenges that emerged in Q2 2025 when ad revenue declined 1% year-over-year.

According to the financial documents, automated sales channels remained the largest contributors to overall advertising growth. However, growth in impressions sold was offset by softness in pricing and deliberate optimization of podcasting inventory within the owned and licensed portfolio.

The quarter saw significant advertising platform developments aimed at addressing these challenges. Spotify launched integration with ChatGPT in October, extending what the company describes as its "ubiquity strategy into the high growth agentic AI landscape." The integration enables Spotify users to receive personalized music and podcast recommendations within ChatGPT, expanding distribution of the platform's content discovery capabilities.

Spotify also announced new demand-side platform partnerships with Amazon and Yahoo during the quarter, granting more advertisers programmatic access to the platform's audio and video inventory at scale. The Amazon DSP integration announced October 1 provides access to Spotify's 696 million monthly users across nine initial markets including the United States, United Kingdom, Canada, Germany, France, Italy, Spain, Brazil, and Mexico.

These partnerships build on the Spotify Ad Exchange launched in April 2025, which introduced real-time auction-based buying capabilities. Since the Ad Exchange launch, advertiser participation has grown by 142%, though this expansion has not yet translated into proportional revenue growth.

The advertising segment's gross margin improvement demonstrated operational efficiency gains despite revenue challenges. Ad-supported gross margin of 18.4% increased 525 basis points year-over-year, driven by improved contribution from both podcasts and music. This continued the margin expansion trajectory that saw Q1 2025 ad-supported gross margin reach 15.3%, up 885 basis points year-over-year.

Product execution accelerates

Spotify launched 30 product updates during fall 2025, according to the earnings announcement. These included lossless audio, playlist mixing tools, messaging capabilities, an enhanced mobile free tier, and taste profile controls.

The lossless audio feature rolled out starting September 10 to Premium subscribers in more than 50 markets, allowing listeners to enjoy higher-quality audio up to 24-bit/44.1 kHz FLAC format. This long-awaited enhancement addresses audio quality demands from the platform's most engaged subscribers while potentially driving additional Premium conversions.

Enhanced mobile free tier features launched globally during Q3, providing ad-supported users with more control to search and play any track or jump directly into songs shared by friends. These improvements contributed to the 17 million monthly active user additions during the quarter, exceeding guidance by 3 million users.

The Jam feature surpassed 100 million monthly listening hours according to the product update section. This personalized, real-time group listening experience enables people to tune in together and build shared queues, with cars emerging as the number one Jam device followed by speakers, phones and televisions.

Audiobooks in Premium celebrated its second anniversary during the quarter, with the English language catalog expanding from 150,000 titles at launch to over 500,000 titles. The company reported introducing millions of new listeners to audiobooks during the two-year period.

Taylor Swift's "The Life of a Showgirl" album became Spotify's most-streamed album in a single day for 2025 and the most pre-saved album ever on the platform. The release prompted a three-day fan experience in New York City featuring photo opportunities and exclusive giveaways.

Regional performance and subscriber growth

Monthly active user growth reflected year-over-year and quarter-over-quarter expansion across all geographic regions. Outperformance was led by Rest of World, Europe, and North America segments. The quarter's 17 million net additions versus guidance for 14 million demonstrated particularly strong execution in developing markets, supported by successful marketing campaigns and the global launch of mobile free tier enhancements.

Premium subscriber growth of 12% year-over-year to 281 million similarly showed expansion across all regions. Latin America and North America led outperformance during the quarter, with growth driven by strong global promotional campaign intake.

Premium average revenue per user declined 4% year-over-year to €4.53, though remained flat on a constant currency basis. The ARPU performance excluding foreign exchange effects reflected benefits from price increases offset by product and market mix dynamics. The company has implemented multiple pricing adjustments across various markets throughout 2025, including increases in European markets announced in August.

Fourth quarter outlook and strategic positioning

Spotify provided fourth quarter 2025 guidance projecting 745 million total monthly active users, implying approximately 32 million net additions. Premium subscribers are forecast to reach 289 million, representing approximately 8 million net additions for the quarter.

Total revenue guidance of €4.5 billion incorporates an approximate 620 basis point headwind from foreign exchange rate movements based on currency rates as of the Q3 close, including a USD:Euro rate of 0.8523 as of September 30. Gross margin is projected at 32.9%, driven primarily by year-over-year favorability in the ad-supported segment.

Operating income guidance of €620 million incorporates €17 million in social charges based on the Q3 closing share price of $698. The company notes it does not incorporate share price movements into forecasts since they remain beyond management control, with meaningful stock price fluctuations potentially creating variance in actual results.

"It all comes back to user fundamentals and that's where we are: 700 million users who keep coming back, engagement at all-time highs. We're building Spotify for the long-term," Ek stated in the earnings announcement.

The company expressed confidence in its positioning to deliver both revenue growth and profit expansion through pricing strategies, product innovation, operational leverage, and eventual advertising business recovery. Management indicated the advertising transformation continues progressing despite near-term revenue challenges, with programmatic capabilities and expanded DSP partnerships positioning the platform favorably for 2026.

Spotify emphasized that while advertising revenue faced headwinds, the business delivered strong free cash flow of €806 million during Q3, bringing last twelve month free cash flow to €2.9 billion. This financial strength supports continued investment in product development, advertising infrastructure, and strategic initiatives while maintaining flexibility for capital allocation including share repurchases.

Timeline

• November 4, 2025: Spotify announces Q3 2025 earnings showing 713 million MAUs and €582 million operating income
• October 2025: Spotify launches ChatGPT integration enabling personalized recommendations within conversational AI platform
• October 1, 2025: Amazon DSP adds Spotify inventory through programmatic partnership across nine markets
• September 2025: Spotify surpasses 700 million monthly active users during Q3
• September 10, 2025: Lossless audio streaming launches for Premium subscribers in 50+ markets
• August 2025: Premium subscription prices increase in multiple European markets
• July 29, 2025: Q2 earnings reveal ad revenue decline of 1% year-over-year to €453 million
• July 11, 2025: Automated podcast buying expands to 170 million listeners across 12 markets
• April 29, 2025: Q1 earnings show 8% ad revenue growth as automation tools gain traction
• April 3, 2025: Spotify Ad Exchange launches with programmatic buying and generative AI tools

Summary

Who: Spotify reported third quarter 2025 financial results affecting 713 million monthly active users, 281 million Premium subscribers, 446 million ad-supported users, 7,323 employees, and thousands of advertisers accessing the platform's automated buying tools. CEO Daniel Ek emphasized sustained momentum in product execution and user fundamentals.

What: The streaming platform achieved double-digit user and subscriber growth with €4.3 billion total revenue (12% year-over-year constant currency), but ad-supported revenue declined 6% to €446 million. Operating income reached €582 million exceeding guidance, while free cash flow hit a record Q3 high of €806 million. The company launched 30 product updates including lossless audio, expanded DSP partnerships with Amazon and Yahoo, and integrated with ChatGPT.

When: Spotify announced results on November 4, 2025, for the quarter ended September 30, 2025. The platform surpassed 700 million users during Q3 and launched multiple product features throughout the September-October period including ChatGPT integration in October and lossless audio in September.

Where: Results reflect global operations across all geographic regions showing year-over-year growth, with particular strength in Rest of World, Europe, Latin America, and North America markets. New DSP partnerships with Amazon launched across nine markets. The company holds €9.1 billion in cash and investments supporting international expansion.

Why: This matters to the marketing community because Spotify's Q3 results demonstrate continued challenges in audio advertising monetization despite expanding reach to 446 million ad-supported users—highlighting the persistent gap between audience scale and revenue generation in programmatic audio. The 6% ad revenue decline alongside 142% growth in Ad Exchange advertiser participation since April suggests structural transformation continues with uncertain near-term outcomes. For advertisers, expanding programmatic access through Amazon and Yahoo DSP partnerships plus ChatGPT integration creates new distribution opportunities, while margin improvements (18.4% ad-supported gross margin, up 525 bps) indicate operational efficiency gains that could eventually support more competitive pricing and better inventory quality as the platform's advertising infrastructure matures.