Spotify filed its second-quarter report with the SEC yesterday, and it contains two milestones and one trap.
What was reported
| Quarter | Year ago | Change | |
|---|---|---|---|
| Revenue | 4,777 | 4,193 | +13.9% |
| Gross profit | 1,596 | 1,320 | +20.9% |
| Gross margin | 33.4% | 31.5% | +1.9pt |
| Operating income | 655 | 406 | +61.3% |
| Operating margin | 13.7% | 9.7% | +4.0pt |
| Net income | 545 | (86) | loss to profit |
| EPS | €2.65 | €(0.42) | - |
In millions of euros
The two milestones
300 million paying
| 30 Jun 2026 | 30 Jun 2025 | Change | |
|---|---|---|---|
| Premium subscribers | 300 million | 276 | +9% |
| Monthly active users | 777 million | 696 | +12% |
This is the first time Spotify has crossed 300 million paying subscribers.
And note the direction: total users are growing faster (12%) than paying ones (9%) - so the platform is expanding faster than it is converting. That is not necessarily bad, since much of the intake comes through free trials, but it is a direction worth watching.
The real story: the margin
Revenue rose 13.9%. Gross profit rose 20.9%. Operating income rose 61.3%.
When each stage in the chain grows faster than the one before it, that is operating leverage - fixed costs are not growing at the rate of revenue.
And the figure proving it: research and development spending fell. €403 million against €415 million a year ago. Total operating expenses rose just 3%, from €914 million to €941 million, against revenue up almost 14%.
The gross margin, for years Spotify's structural weakness against the content companies, widened to 33.4%.
And the trap in the bottom line
From an €86 million loss to a €545 million profit - most of the jump is not operating
At first glance this looks like a dramatic reversal. But you have to look at the finance line.
| Quarter | Year ago | |
|---|---|---|
| Operating income | 655 | 406 |
| Finance income/(costs), net | +65 | -358 |
| Income before tax | 720 | 48 |
In millions of euros
A year ago the finance line subtracted €358 million. This year it added €65 million. A €423 million difference - unrelated to the business.
The main driver at Spotify is social charges on share-based compensation, which move with the share price. When the stock rises sharply this line hurts profit; when it settles, it releases.
The meaning: operating income of €655 million is the number describing the business. Net income of €545 million is affected by a line management does not control.
The full half year
For completeness, in the first six months of 2026:
- Revenue: €9.310 billion against €8.383 billion
- Operating income: €1.370 billion against €915 million - up 50%
- Net income: €1.266 billion against €139 million
A change in management
A detail appearing in the report worth noting: the company refers to its new Co-Chief Executive Officers, who together serve as the joint chief operating decision makers. Following that, certain activities were reclassified between the Premium and Ad-Supported segments, and prior period figures were restated.
So the segment reporting structure also changed this year - which affects segment comparisons against prior years.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
Spotify is a test case for what I call the moment a growth story becomes a business.
For years the argument against it was that the model was broken at its foundation: it pays the content companies such a high share of revenue that no margin remains. This quarter contradicts that with one number - a gross margin of 33.4%, two points wider in a year.
And what impresses me even more: research and development spending fell. Not grew slowly - fell. A company growing revenue 14% while cutting R&D is signalling it has moved from the building phase to the operating phase.
And what I do not take at face value: the swing from loss to profit. €423 million of the improvement comes from the finance line, which moves with the share price. The number I look at is operating income - €655 million, up 61%. That too is excellent, and at least it describes the business.
And the point I put a question mark on: 12% user growth against 9% subscriber growth. That gap says the platform is growing faster than it converts to payers. In a single quarter that is noise. If it persists for several quarters, it changes the revenue model.
