Summary
- Spotify delivered a strong Q2, with revenue up 14% year over year, a record 33.4% gross margin, and €797 million in free cash flow.
- Premium subscribers reached 300 million, while monthly active users rose 12% to 777 million, though MAUs finished 1 million below guidance.
- My DCF estimates Spotify’s fair value at $366.13 per share, with the stock trading about 29% above fair value despite assuming 25.8% annual growth for five years.
- AI, video, audiobooks, and new add-ons could support future growth, but current valuation leaves little margin of safety and supports my sell rating.
stockcam/iStock Unreleased via Getty Images
Investment Thesis
I assign Spotify Technology S.A. (SPOT) a sell rating due to the disconnect between the company's strong operating performance and its current valuation. My discounted cash flow, detailed below, estimates an intrinsic value of
Quick Insights
-
How does the company's free cash flow compare to its net income?
Free cash flow of $3.267 billion exceeds net income of $2.496 billion by about $771 million, showing strong cash conversion.
-
What does the low capital expenditure imply for future cash flow?
With capital expenditures of just $68.84 million versus $3.336 billion in operating cash flow, Spotify’s capital-light model should support strong free cash flow conversion if operating cash flow remains healthy.
-
How should investors view the quality of the company's earnings?
Earnings quality appears strong, as operating cash flow of $3.336 billion exceeds net income of $2.496 billion, supporting solid cash conversion.
Create a free account to read the full article
Gain access to the world's leading investment community.
Already a member? Sign in
Create free account
By creating an account using any of the options above, you agree to the Terms of Use & Privacy Policy
or
Continue with Google
Continue with Apple
About SPOT Stock
| Symbol | Last Price | % Chg |
|---|---|---|
| SPOT Spotify Technology S.A. | 472.89 | -3.77% |
| Post | 473.00 | 0.02% |
- 1D
- 5D
- 1M
- 6M
- 1Y
- 5Y
- 10Y
Chart
Chart with 200 data points.
View as data table, Chart
The chart has 1 X axis displaying Time. Data ranges from 2026-09-28 09:30:00 to 2026-10-02 16:00:00.
The chart has 1 Y axis displaying values. Data ranges from 471.01 to 504.04.
Created with Highcharts 13.1.1Sep 28Sep…Sep 29Sep 30Oct 1Oct 2450475500525
End of interactive chart.
Market Cap
PE
Yield
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers
More on SPOT
Spotify, Claude face disruptions as user reports surge
Baron International Growth Fund adds new positions in SDMHF, SPOT; exits seven positions.
Spotify expands video partnership with music platform Genius
Spotify Still Looks Like A Hold Despite Better Fundamentals
Related Stocks
| Symbol | Last Price | % Chg |
|---|---|---|
| SPOT SPOT | 472.89 | -3.77% |
| Post: | 473.00 | 0.02% |
| SPOFF SPOFF | 0.19 | 0.35% |
| SPOT:CA SPOT:CA | 0.29 | 7.41% |
- 1D
- 5D
- 1M
- 6M
- 1Y
- 5Y
- 10Y
Chart
Line chart with 3 lines.
View as data table, Chart
The chart has 1 X axis displaying Time. Data ranges from 2026-09-28 09:30:00 to 2026-10-02 16:00:00.
The chart has 1 Y axis displaying values. Data ranges from -10.08 to 5.26.
Created with Highcharts 13.1.1Sep 28Sep…Sep 29Sep 30Oct 1Oct 2-20%-10%0%10%
End of interactive chart.
Compare
Trending Analysis
Trending News
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.
