Episode Details

Spotify Technology S.A. (SPOT) Q2 2026 — Reported Aug 4, 2026 pre-open for the quarter ended June 30, 2026. Spotify REPORTS IN EUROS and TRADES IN DOLLARS, so every figure is labelled. Revenue EUR4,777M, +14% (+15% cc), in line with guide. Gross margin 33.4%, an all-time record. Operating income EUR655M vs a EUR630M guide - EUR655M, NOT the EUR762M some headlines used, which is the USD conversion. Diluted EPS EUR2.61 vs a EUR0.42 LOSS. Subscribers 300M (a BEAT); MAUs 777M (a MISS); ad revenue EUR446M, +1%. Prior close $486.33; the session opened $466.95 (-4.0%) then reversed to $499.64 (+2.7%). Spotify announced 300 million subscribers - and ADVERTISING revenue grew ONE PERCENT, EUR440M to EUR446M, while the ad-supported audience grew 14% to 494M. Revenue per free listener fell ~11%, to about thirty euro cents a month. Two more nobody flagged: operating income rose 61%, but last year carried EUR115M of Social Charges - payroll taxes that move with the SHARE PRICE - against EUR1M now, so 46% of the gain is a falling stock; ex-charges profit grew 25.9% while costs grew 17.6%. THE CALL: HOLD (3/5, FAIRLY PRICED - THE STREET'S NUMBER IS NOT) — base-case value ~$482.0 vs ~$499.64 today. KEY METRICS: - CALL: HOLD 3/5 - fair value ~$482 vs $499.64 (-3.5%), i.e. fairly valued. We are not bearish on Spotify; we are bearish on the STREET's $600.69. Built in EUROS, converted ONCE at EUR/USD 1.1527. Per-share figures come off the filing's EPS table (208,858,469 DILUTED) - vendor 'diluted EPS' for this issuer returns the BASIC number. - VALUATION: owner FCF = EUR3,261M LTM reported FCF, LESS ~EUR400M for cash taxes converging on book (H1 paid EUR121M on a EUR391M charge), LESS ~EUR300M share-based pay = ~EUR2,500M. Grow 15/14/13/12/10%, fade to 5%, 3% terminal, at 8.75%: EV EUR78,345M + EUR9,000M net cash = EUR87,345M / 208.9M = ~$482. Bear $305, bull $699. KEY TEST: the IDENTICAL model on the UNADJUSTED EUR3,261M returns $614 - which IS the consensus. - ADVERTISING: EUR446M, +1% (+3% cc), while ad-supported MAUs grew 14% to 494M. Revenue per ad listener fell ~11%, EUR1.02 to EUR0.90 a quarter - thirty euro cents per free listener per month. Spotify added 61M free users and collected six million euros for them. Ads are 9.3% of revenue, down from 10.5%, at a 19.1% gross margin vs 34.9% in Premium. - MILESTONE AND GUIDE: subscribers beat while MAUs missed - the paid base overshot as the free funnel undershot, on 'strong global promotional campaign intake' and a 20th-anniversary campaign driving 'our single biggest day of new subscribers ever'. Premium ARPU EUR4.89, +7%, on price rises. Q3 guide: revenue EUR5.0B but assuming a ~200bps FX TAILWIND; gross margin 32.9%, DOWN from the record; operating income EUR670M = a 13.4% margin vs 15.8% in Q1. - VS THE STREET: Buy - 32 buy / 18 hold / 2 sell across 52 analysts - averaging $600.69 (high $720, low $420); Morgan Stanley $640 Overweight. They see +20%; we see -3.5%. We DIFFER and are more CAUTIOUS - but do NOT dispute the milestone, the record margin or the EUR3.3B trailing FCF. SOURCING: CIK 0001639920 verified on EDGAR (6-K accession 0001140361-26-031044). What to watch: Bullish: ad revenue back to double-digit cc growth for two straight quarters moves us toward $570. Bearish: a THIRD quarter of margin guided down while the spend is still called temporary, or Premium ARPU growth under 3%, takes us to ~$385. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.