Spotify released better-than-expected third-quarter results for 2025, with positive revenue growth, user growth, and a substantial increase in margins. The company's performance exceeded Wall Street's estimates, despite the company providing mixed guidance for the next quarter. While Spotify stock had an initial bump after the earnings report, it later fell slightly.
Spotify has announced a 7% rise in total revenue for Q3 2025, to $4.27 billion (approximately $4.9 billion), exceeding the estimated $4.23 billion. This performance is a 12 percent increase in constant currency terms. The company's advertising income has decreased by 6 percent, but total revenue has grown significantly, mainly due to improved music and podcast advertisements.
The firm has also experienced strong user growth with 713 million monthly active users (MAUs) by the end of Q3, surpassing analyst expectations of 710 million. Estimates show that premium subscribers grew by 12% to 281 million. The increased number of paid and free subscriptions is an indication of Spotify's sustained commitment to its service offerings, which have contributed to long-term engagement. The company has achieved a strong performance, increasing the number of new premium subscribers by 5 million in the quarter.
The margin recovery at Spotify remains one of the key factors contributing to its recent success. This company had a gross margin of 31.6% in Q3 2025, which was higher than the expectations and previous projections of Spotify, which stood at 31.1%. Moreover, this margin growth was attributed to the increase in ad revenue and ongoing cost control activities at Spotify.
In the future, the firm expects Q4 2025 revenue to be $4.5 billion, slightly below the forecast of $4.57 billion. Nevertheless, Spotify hopes to increase its MAUs to 745 million by Q4, a 32 million growth. According to the company, the number of premium subscribers is estimated to hit 289 million by year-end. Furthermore, the company's gross margin is projected to increase to 32.9% in Q4, driven by increased ad growth that will help absorb the escalating content costs.
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As Spotify continues to grow, at the end of 2025, CEO Daniel Ek will step down to become the company's executive chairman. Effective January 1, 2026, Gustav Söderström and Alex Norstrom will assume the role of co-CEOs. In addition, the company emphasized that the leadership structure has already been in place since 2023, and it is expected that this change will ensure the continued strategic consistency of the company.
Spotify continues to focus on product diversification and enhancing user interaction. The latest features, such as a ChatGPT-powered personalized playlist and a new video podcast collaboration with Netflix, are part of the company's effort to diversify its content and target new audiences.
Spotify is also seeking to enhance its advertising capabilities, and new agreements with Amazon and Yahoo will enable advertisers to have greater access to Spotify's massive audio and video inventory.