Spotify has reported strong user growth in its Q2 2025 earnings, exceeding guidance for both its Monthly Active Users (MAUs) and Premium Subscribers. Its total MAUs reached 696 million, an 11% year-over-year (Y/Y) increase and its Premium Subscribers grew to 276 million, a 12% Y/Y increase. Meanwhile, its overall total revenue increased 10% Y/Y to €4.193 billion.
Despite these positive metrics, some deeper digging into the financial details reveals some unexpected challenges for the company.
One of the issues Spotify faced in Q2 was its Operating Income which was below the guidance level, coming in at €406 million. Another significant issue was €116 million in Social Charges, which were a huge €98 million higher than forecast. These Social Charges are payroll taxes linked to share-based compensation, which fluctuate with the company’s stock price. The company’s higher payroll, related expenses, and a shift in revenue mix also made the firm miss the operating income guidance.
The company noted that it doesn’t factor currency or share price movements into its forecasts as these are factors beyond its control.
Another area where Spotify is showing some weakening is in ads. While Premium Revenue grew 12% Y/Y, its Ad-Supported Revenue saw a -1% Y/Y decline. On a constant currency basis, Ad-Supported Revenue grew 5% Y/Y, but the reported decline highlights real-world performance. The company was also hit by unfavorable currency movements which impacted total reported revenue by €104 million compared to guidance. This shows that its ad business continues to be a volatile segment for the firm.
Despite the mixed financials, Spotify has some good news for investors. It generated record-high Free Cash Flow of €700 million, bringing the last twelve months (LTM) Free Cash Flow to €2.8 billion. Thanks to this, the Board of Directors has approved a $1 billion increase to the existing share repurchase program, raising the total authorization to $2 billion; this will help to buoy the company’s stock price.