Spotify has 761 Million Users and the Stock Is Down 44% From Its Peak

Key Stats for Spotify Stock

• 52-Week Range: $405.00 to $785.00
• Current Price: $441.21
• Street Mean Target: $593.90
• Market Cap: ~$90.7B
• LTM Gross Margin: 32.3%
• LTM EBIT Margin: 13.7%
• Forward 2-Yr Revenue CAGR: ~14%
• NTM P/E: ~30x

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Gross Margin Went From 25% to 32% in 3 Years

For most of its history, Spotify was a growth story without a profitability story. The company spent years building scale across music, podcasts, and audiobooks while paying out the majority of its revenue to rights holders, leaving very little left over. That dynamic has changed meaningfully.

Gross margin troughed at around 25% in 2022 and has climbed steadily since, reaching nearly 32% by the end of 2025. The driver is not just cost discipline in the core music business. Podcasting, which was deeply unprofitable as recently as 2021, reached 20% gross margin in 2026, and management sees a path to 40%.

Audiobooks, only two years into its rollout, grew listening hours 60% year over year and is approaching $100 million in annual recurring revenue. Both verticals are now diluting unit economics in a positive direction as they scale.

Q1 2026 continued the trend. Gross margin came in at 33.0%, the second-highest in company history, beating guidance by around 20 basis points. Revenue grew 14% year over year to €4.5 billion, with premium revenue up around 15%, driven by subscriber growth and nearly 6% expansion in average revenue per user.

Co-CEO Alex Norström told investors the company is “growing at scale, generating significant cash, and reinvesting to capture the opportunities that matter most.”

The advertising business remains the one soft spot. Ad-supported revenue grew only about 3% in Q1, as legacy direct sales channels remained choppy.

Management rebuilt its ad stack end-to-end to capture programmatic buying, with biddable formats now representing over 30% of ad revenue and growing. The expectation is that the second half of 2026 will show meaningful improvement as those channels scale.

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The Stock Is Down 26% From Its Peak. The Business Is Not.

Spotify ended Q1 with 761 million monthly active users, 293 million of them paying subscribers, operating across 184 markets. Free cash flow reached €824 million in the quarter alone. The balance sheet shows €8.8 billion in cash and no debt other than lease liabilities.

Against that backdrop, the stock has spent most of 2026 in drawdown territory, hitting a max decline of around 30% in early February before partially recovering and settling back near 26% below its recent peak.

Some of the pressure followed Q1 earnings, when several Wall Street firms cut price targets, citing concerns about AI disruption to the subscription model and softer near-term operating income guidance.

The AI concern is worth taking seriously, but also worth contextualizing. Spotify’s DJ feature, which uses AI to generate personalized audio commentary between songs, now has 94 million users. The company is training what it calls a Large Taste Model on 3.4 trillion daily data points, a dataset no competitor can replicate without Spotify’s scale and user engagement history.

At its May 2026 Investor Day, management set 2030 targets of 35-40% gross margins, operating margins above 20%, and around 1 billion monthly active users.

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The Model Sees 132% Upside. Here’s What It Requires.

TIKR’s valuation model targets around $1,020 for Spotify stock in the mid case, implying a potential total return of around 132% over roughly four and a half years, or about 20% annualized.

The mid case assumes around 12% annual revenue growth, net income margins expanding to roughly 17%, and EPS growing at around 15% per year.

The range across scenarios is wide. The low case reaches around $1,060 by 2030 while the high case approaches around $1,845, reflecting genuine uncertainty about how quickly the ad business recovers and whether margin targets prove achievable.

What the model makes clear is that even conservative assumptions produce meaningful upside from today’s price.

Should You Invest in Spotify Technology S.A.?

Spotify’s fundamentals are moving in the right direction, while the stock has moved in the opposite direction, which is the setup most long-term investors are looking for. The risks are real: the ad business is still rebuilding, AI could pressure content costs, and the valuation is not cheap at 30x forward earnings.

But with a fortress balance sheet, accelerating margins, and a user base that rivals those of the world’s largest platforms, the gap between the business and its stock price is hard to ignore.

See the full TIKR model for SPOT, including scenario assumptions and historical valuation multiples. Build your own valuation for Spotify stock on TIKR for free →

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!