Spotify's Q2 print confirmed continued operational momentum, with Premium subscribers, gross margin, and EBIT all ahead of our estimates and guidance, and revenue in line. Monthly active users (MAU) came in marginally below guidance, but according to management, reflected a deliberate choice to prioritize monetization over raw reach, rather than demand weakness. As flagged in Q1 and at the May Investor Day, the step-up in operating expenses remains visible near term, with Q3 guidance still absorbing this spend. Importantly, management reiterated that these investments are time-bound and non-structural, and are set to moderate from Q4'26 into 2027, with full-year operating margin still expanding year-on-year. We therefore continue to view the impact as temporary, leaving our medium-term thesis intact. The excessive, short-sighted reaction we flagged in Q1 has since partly unwound, with the shares re-rating after the Investor Day, a move we see as justified de-risking rather than an overreach. With the near-term noise fading and the signal coming through clearly, we reiterate our Buy recommendation and target price of USD 570 on broadly unchanged estimates.

Subscribers and margins ahead, MAUs just below

Spotify reported Q2 MAUs of 777m and Premium subscribers of 300m (Q1'26: 761m/293m), with MAUs 1m below guidance and our 778m estimate, subscribers 1m ahead of our 299m estimate (net additions 16m and 7m). MAU growth was broad-based across regions, led by Rest of World, Europe and North America. Revenue came in at 4.78 BEUR (+14% y/y), in line with our estimate and guidance, with Premium revenue up ~15% y/y and the ad-supported business still soft (+1% y/y) but on track for the H2 acceleration we expect. The gross margin reached a record 33.4%, above our estimate and the 33.1% guidance, and FX-neutral ARPU grew ~7.4% (guided 7-7.5%). EBIT landed at 655 MEUR (~13.7% margin), beating our 639 MEUR estimate and the 630 MEUR guidance. Importantly, the beat was operational, as social charges* were only slightly below guidance, indicating that the beat reflected gross-margin strength rather than the social charges line.

Estimates broadly unchanged, long-term thesis intact

Following the Q2 print, our estimates see only modest revisions. We make small downward revisions to our 2026-2027 MAU estimates (818m/895m from 823m/898m), reflecting the marginal Q2 miss and below-expectations Q3 MAU guidance of ~788m (vs. our 795m) In our view, this, alongside the parallel step-up in marketing and product investment, reflects a self-inflicted choice to monetize the existing base rather than chase lower-value reach, not a sign of demand weakness. As such, we leave our subscriber estimates broadly intact. The Q3 EBIT guide of 670 MEUR (~13.5% margin) implies somewhat higher near-term OpEx than we had assumed, but still relatively consistent with the ~200 MEUR of incremental full-year OpEx management has guided for. We therefore trim our H2'26 EBIT margin slightly while keeping 2027-2028 broadly intact, leaving our 2026e EBIT margin broadly unchanged at ~14.5% due to the Q2 beat, on ~14% revenue growth. We have also aligned our tax assumptions with the ~22% normalized P&L rate guided for during the Investor Day.

Valuation remains attractive after a small, but earned, re-rating

The shares have re-rated modestly since our Q1 report, driven primarily by the Investor Day, which in our view resolved several of the strategic debates that had weighed on the stock. Following our largely unchanged estimates, we think the valuation still offers attractive risk-adjusted upside on a 12-month horizon. The stock now trades at EV/EBIT of 27x-21x, EV/FCFF of 24x-20x, and EV/Gross Profit of 12x-9x for 2026-2027, and at the low end of our acceptable ranges. While the temporary margin headwind still weighs on Q3, we view the quarter as further de-risking the medium-to-long-term thesis, with management confirming the elevated spend is non-structural and controllable. We continue to see the company as well-positioned to deliver strong earnings growth in the coming years, supported by improving monetization, user growth, and margin expansion as efficiency initiatives and the add-on architecture compound.