Spotify Stock Rallies After Earnings Because not All AI Winners are Chip Plays

Dow Jones
2 hours ago

Spotify Technology stock jumped early Thursday -- as the wider stock market fell -- after the streaming platform reported more premium subscribers than it had previously forecast.

More importantly: profit growth is ahead of estimates as it looks like investments into AI are bearing fruit. It's a reminder that chip stocks and their ilk aren't the only winners from the AI trend.

Spotify stock was up nearly 5% in premarket trading on Thursday after posting quarterly results. Futures tracking the S&P 500 index were down more than 1%, dragged lower by technology stocks and especially the chip sector.

Spotify reported revenue of 4.97 billion euros ($5.58 billion) in the September quarter, ever-so-slightly missing estimates of EUR4.98 billion among analysts surveyed by FactSet. Earnings per share came in at EUR2.48.

What looks especially good: Spotify said its premium subscriber base grew to 306 million in the last quarter, a million more paying customers than it had previously guided.

In its forecast for the current quarter, Spotify sees revenue at EUR5.2 billion and expects to add another 10 million premium subscribers to 316 million.

Even better: Spotify expects operating income of EUR820 million in the current quarter, firmly ahead of analysts' expectations.

It looks like the AI thesis for Spotify is finally playing out. Significant investments into AI -- such as the platform's AI DJ feature, which curates music for listeners -- have raised spending fears among investors.

Operating income in the third quarter came in at EUR672 million, with margins squeezed slightly from earlier in the year, partly reflecting the growth in expenses "driven by temporarily elevated growth in marketing and cloud/AI spend," the company said.

Operating income forecast to jump to EUR820 million should ease some of those spending fears -- and drive optimism among investors that AI bets are paying off.

"This was a quarter where we did what we said. We've built a strong business that keeps compounding, we invest when we see a path for growth, our costs are moderating, and there is more runway ahead," co-CEO Alex Norström said in a statement. "Every time we expand what's on Spotify, we bring in new listeners and give existing ones more reasons to come back, almost every day."

While Spotify stock has lagged in 2026 -- the shares were down more than 8.5% so far this year into Thursday -- some analysts have seen the streaming platform as highly defensible against AI.

As the stock market grapples with weakness on Thursday driven by AI concerns, while Spotify outperforms, there is added symbolism to that thesis.

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