Spotify Technology's (SPOT) profit growth and free cash flow are expected to be driven by subscriber additions, pricing actions, new tiers, improving advertising, and emerging businesses, reinforcing confidence in the company's long-term growth outlook, BofA Securities said in a note Wednesday.

The brokerage said Spotify's Q4 results provided a "sigh of relief," with monthly active users and gross margins beating expectations and revenue slightly ahead, rising 7% year over year to 4.53 billion euros ($5.38 billion) and margins expanded to 33.1% on stronger advertising and improved podcast profitability.

Management is confident margins will continue to expand in 2026, supported by recent price increases that should allow revenue growth to outpace content costs, according to the note.

Addressing AI-related concerns, BofA said Spotify views AI as a competitive edge rather than a risk, citing personalization, product innovation, and scale as key strengths, with product updates expected at its May investor day.

BofA Securities maintained its buy rating on the stock and lowered its price target to $750 from $900.

Shares of Spotify were up 1.3% in recent trading Wednesday.

Price: 482.41, Change: +6.38, Percent Change: +1.34