Is Spotify Technology SA a Buy After Its Latest Earnings Report?
2026-10-25 10:40
•Eric Volkman •The Motley Fool
••••• • Axe Cap view
Spotify’s Earnings: Growth Wins Over Profit Miss
Spotify’s latest results show strong user and revenue growth despite a profit shortfall, making it an interesting watch from a global growth angle.
Spotify’s Q3 numbers tell a story of a company still growing fast, but struggling to translate that into profits. Revenue grew 16% year-on-year with premium subscribers hitting 306 million, a solid 9% increase. Yet, net income fell sharply, missing estimates, which explains some investor caution. Where Spotify shines is in its free cash flow — over €800 million — and an impressive 33% gross margin, suggesting operational efficiency is improving. For South African investors, the key link is currency risk. The rand’s recent volatility against the euro means that while Spotify’s growth looks attractive, earnings reported in euros could translate to uneven rand returns. On valuation, the stock trades at a forward P/E of 52, pricey even for a growth story. If you’re buying SPOT indirectly, say through Naspers or Prosus, remember these counters also carry tech market and FX risk. The biggest upside lies in Spotify’s push into audiobooks and AI-driven features, which could expand its moat. The risk? Competition and high valuation could cap near-term gains. this is just our opinion and not financial advice
Watch Spotify closely, but prefer a cautious approach—maybe a small initial position through Prosus for South African exposure. Consider trimming if FX volatility spikes or if earnings disappoint again.
- Spotify (SPOT)
- Prosus
- USD/ZAR
- Euro/zar exchange rate swings
- High valuation limits
- Intense competition in streaming
6/10
Spotify reported Q3 2026 earnings with revenue of €5 billion (16% YoY growth) and 306 million premium subscribers (9% growth), but net income fell to €580 million from €1 billion year-over-year, missing analyst estimates. However, the stock surged nearly 4% as investors focused on strong operational metrics including record 33% gross margin, €823 million in free cash flow, and robust Q4 guidance. The analyst views Spotify as a buy despite a forward P/E of 52, citing its dominant market position and growth opportunities in audiobooks and AI-powered features.
Our take is based on reporting first published by The Motley Fool.