Spotify Technology (SPOT) continues to launch differentiated products and features that support additional monetization opportunities as well as enhance operating leverage, UBS said in a Monday note.

The analysts expect Q3 revenue of 4.97 billion euros ($5.57 billion), which is up 14.7%, and gross margins of 32.9%, which is up 130 basis points, aided by audiobook bundle mix and marketplace growth offsetting investments in content and partner program.

UBS further forecast quarterly operating income of 674 million euros on 18% operating expense growth, driven by investments in AI and higher marketing spend.

Meanwhile, UBS' 2026 estimates remain unchanged at 19.5 billion euros in revenue and 33.2% gross margins. Spotify is also expected to generate 3.4 billion euros in free cash flow, up 19% inclusive of higher cash taxes, the note said.

UBS lowered its price target to $675 from $690 based on a 24x slightly lower forward EBITDA, and maintained its buy rating.

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