Spotify: New CEOs Address Analysts on Earnings Call

Spotify’s new co-CEOs, Alex Norström and Gustav Söderström, addressed analysts during the company’s first quarter 2026 earnings call, outlining the company’s performance and future ambitions, particularly regarding artificial intelligence (AI). The call took place on April 28, 2026, and provided insights into the company’s financial results and strategic direction.

Spotify reported total revenue of €4.5 billion (approximately $5.30 billion USD) for the first quarter of 2026, representing a 14% year-over-year increase at constant currency. Operating income reached €715 million ($837 million), with an operating margin of 15.8%. Monthly active users (MAU) grew to 761 million, a sequential increase of 10 million and a 12% year-over-year rise. Premium subscribers reached 293 million, an increase of 3 million during the quarter.

The company’s financial performance exceeded expectations in several areas. Gross margin reached 33%, surpassing guidance by approximately 20 basis points, and expanding by roughly 133 basis points year-over-year. Free cash flow totaled €824 million, described as stronger than typical due to timing effects expected to reverse in the next quarter. Spotify also repurchased $361 million in common stock, offsetting dilution from employee equity programs, and settled $1.5 billion in exchangeable notes with existing cash, ending the quarter with €8.8 billion in cash and no debt aside from lease liabilities.

AI as a Core Focus

A significant portion of the earnings call was dedicated to discussing Spotify’s strategy around artificial intelligence. Co-CEO Gustav Söderström framed the current moment as a potentially transformative period for the company, comparing the AI opportunity to the launch of the iPhone and App Store. Söderström also reiterated his interest in AI-generated “derivatives” of existing music, describing them as an untapped revenue stream for artists.

This focus on AI follows partnerships announced earlier with the three major music companies, Merlin, and Believe, aimed at developing “artist-first” AI music products. Analysts questioned the leadership team on various aspects of AI integration, including the potential for launching an AI music creation tier, the justification for rising compute costs associated with AI development, and the possibility of competition from standalone AI music platforms.

Ad-Supported Revenue and ARPU

Premium revenue increased by approximately 15% year-over-year, with average revenue per user (ARPU) advancing by 5.7%. Ad-supported revenue rose by around 3% year-over-year, with the automated sales channel now accounting for over 30% of ad-supported revenue. The company is actively working to improve the performance of its ad-supported tier and leverage automation to drive growth in this segment.

Looking Ahead: Q2 Guidance

For the second quarter of 2026, Spotify forecasts 778 million monthly active users (a net addition of 17 million) and 299 million premium subscribers (a net addition of 6 million). Total revenue guidance for Q2 is €4.5 billion.

The earnings call signaled a continued focus on growth, profitability, and innovation, with AI emerging as a central pillar of Spotify’s future strategy. The company’s ability to successfully integrate AI technologies and capitalize on new revenue opportunities will be crucial in maintaining its competitive position in the evolving music streaming landscape.