Spotify added 6 million premium subscribers last quarter, exceeding guidance and Wall Street expectations by about 1 million. Spotify's premium subscriber base reached 306 million, a 9% increase from a year earlier. Premium subscriber revenue increased 17% year over year because of subscriber growth and higher prices. Free, advertising-supported monthly active users worldwide increased 12% year over year to 499 million.
Spotify recorded third-quarter revenue of €4.97 billion, broadly matching guidance of €5 billion. Spotify's gross margin reached 33%, slightly exceeding guidance. Growth in paid subscribers is helping Spotify become more financially stable and profitable, supporting shareholder returns and greater business investment.
Co-CEO Alex Norström said on Thursday that increasing cash flow allows Spotify to pursue more organic investment opportunities while returning surplus capital to shareholders. Spotify returned surplus cash through share buybacks in the third quarter, fulfilling a commitment made at Spotify's investor day in May. CFO Christian Luiga said Spotify previously devoted most cash flow to share repurchases that offset dilution from employee stock compensation.
Spotify believes AI can improve profitability through a "large taste model" that encourages interactive sharing rather than passive listening. Co-CEO Gustav Söderström said on Thursday that Spotify invested substantially earlier this year in the model and other AI features. Söderström said those investments are now improving engagement. Söderström said discovery has increased by double digits, helping artists as the music catalog expands. Söderström said the model is on course to add billions of hours annually. Söderström believes Spotify remains at an early stage of using the taste model to support growth.
AI investments are helping increase free users. However, Spotify's advertising business remains under pressure. Spotify fulfilled an earlier pledge to accelerate advertising revenue growth in the second half of 2026, recording a 10% year-over-year increase in the third quarter. However, advertising revenue grew more slowly than premium subscriber revenue. Norström attributed the advertising improvement to technology investments that simplify advertising purchases on Spotify.
Spotify needs users to spend more time on the platform and creators to engage more to expand the taste model. Spotify introduced a paid membership program for podcast creators earlier this week. Spotify also recently extended audiobook availability from 22 markets to more than 180.
Spotify announced an agreement with Universal Music Group in May to develop a tool for fans to make song covers and remixes involving participating artists and songwriters. Spotify later announced agreements with additional music licensing organizations and publishers. Söderström believes the tools, offered as premium add-ons, could increase engagement and generate revenue opportunities for artists on Spotify. "We think this game is going to be decided based on who compensates the most," Söderström said.
Spotify Surpasses Premium Subscriber Estimates, Boosts AI Personalization
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Summary
Spotify added 6 million premium subscribers in Q3, surpassing forecasts by 1 million, with its total premium base now at 306 million. Revenue hit €4.97 billion, matching guidance, while gross margin stood at 33%. Co-CEOs noted rising cash flow from AI-driven engagement and user growth, with plans to reinvest and return value to shareholders. The platform expanded audiobook access and launched fan content tools in a partnership with Universal Music Group. The move supports ecosystem growth, aligning with trends in AI + crypto news.
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