Spotify Technology shares climbed 8.6% on Thursday after the music streaming company projected fourth-quarter operating income above Wall Street expectations, buoyed by subscriber growth and continued investment in artificial intelligence-powered features. The stock's advance stood out against a broader market decline fueled by renewed worries over AI spending and elevated technology valuations.
For the three months ended September 30, Spotify reported revenue of €4.97 billion ($5.58 billion), marginally below the €4.98 billion analysts had penciled in, according to LSEG data. Earnings per share came in at €2.48, compared with the consensus estimate of €2.80. Despite the revenue and earnings misses, the company's subscriber base continued to expand, and its forward guidance pointed to improving profitability as it leverages personalization tools to attract and retain users.
Fourth-quarter outlook beats expectations
Spotify forecasts fourth-quarter operating income of €820 million ($920.53 million), exceeding the average analyst estimate of €813.4 million, per LSEG. The company also guided for revenue of €5.2 billion in the current quarter, alongside a rise in premium subscribers to 316 million from 306 million in the third quarter. That projected addition of 10 million premium subscribers surpasses analysts' expectations of roughly 314.7 million for the period.
Monthly active users increased 1% sequentially to 788 million in the third quarter. However, the company's forecast of 818 million monthly active users for the fourth quarter came in slightly below the analyst estimate of 819 million. Third-quarter operating income reached €672 million, broadly matching the Visible Alpha-compiled consensus of €671.8 million.
The fourth-quarter forecast signals a further improvement in operating income, potentially easing investor concerns about rising costs. The company attributed part of its third-quarter operating income pressure to higher marketing, cloud, and AI-related spending, noting that expenses were driven by temporarily elevated investment in these areas. Still, the outlook suggests Spotify expects to enhance profitability while continuing to invest in its platform.
AI features remain central to growth strategy
Spotify has been investing heavily in artificial intelligence to improve music discovery, user engagement, and personalization. Its AI DJ feature curates personalized music selections with spoken commentary, while prompt-based playlists allow users to describe their preferred mood or listening experience. These tools are designed to attract new subscribers and encourage existing users to spend more time on the platform.
The company faces competition from emerging AI music-generation services such as Suno and Udio. Co-CEO Alex Norström said in a statement that Spotify invests when it identifies growth opportunities and that its costs are moderating.
Licensing deals expand AI music ambitions
Spotify has also taken steps to establish licensing arrangements for AI-generated music. Earlier this week, the company announced a deal with music distributor Believe for an upcoming paid tool designed for fan-made AI covers and remixes. It has also signed licensing agreements with Universal Music Group, Merlin, and Kobalt for the tool. These agreements come as the music industry navigates the implications of generative AI and the use of existing music to create new content.
Despite Thursday's gains, Spotify shares had fallen more than 8.5% in 2026 before the latest trading session. The company's latest outlook provides investors with a measure of confidence in its subscriber growth and profitability prospects.
This article is for informational purposes only and does not constitute financial advice.
