Spotify Targets 305 Million Premium Subscribers and a 32.9% Q3 Margin

Spotify is due to report third-quarter results before U.S. trading opens Oct. 22, putting its target for 305 million Premium subscribers alongside a gross-margin forecast below Q2’s level.

Its Aug. 4 outlook projected 788 million monthly active users and 305 million Premium subscribers for Q3. Against Q2’s 777 million monthly active users and 300 million Premium subscribers, those targets imply net additions of about 11 million users and five million paid subscribers.

The forecast also called for €5 billion in revenue, a 32.9% gross margin and €670 million in operating income. The gross-margin target is 0.5 percentage point below Q2’s 33.4%, while the operating-income goal is €15 million above the €655 million recorded in Q2.

In the June quarter, revenue rose 14% year over year to €4.777 billion. Monthly active users increased 12% to 777 million, and Premium subscribers rose 9% to 300 million. The Q3 revenue outlook included an estimated 200-basis-point year-over-year tailwind from foreign exchange.

Premium revenue climbed 15% in Q2 to €4.331 billion. Average revenue per Premium user reached €4.89, up 7%, with price increases contributing to the gain. Spotify primarily earns revenue through Premium subscriptions and advertising, and subscriptions grew faster in the quarter.

Ad-supported revenue totaled €446 million, up 1% as reported and 3% on a constant-currency basis. It represented 9% of total revenue. The constant-currency comparison adjusts for the effect of exchange-rate changes.

Operating expenses rose 3% year over year as reported in Q2. Excluding currency effects and social charges, they increased 19%, with higher marketing, cloud and AI spending contributing to the rise. Spotify’s Q3 outlook pairs projected subscriber additions and revenue with a gross-margin target below the previous quarter’s result.

Spotify scheduled its Q&A for 8 a.m. ET (12:00 UTC) Oct. 22.