Raymond James has reduced its price target for Spotify (NYSE:SPOT) to $620.00 from $730.00 while keeping its Outperform rating on the music-streaming company. The new target still sits well above Spotify's recent trading level of $475.99, despite the stock having dropped 12.48% over the past week.
The revision came after Spotify released its fourth-quarter 2025 financials. Raymond James characterized those results as "largely in line with expectations," and specifically called out first-quarter 2026 guidance as exceeding consensus estimates, with gross margins singled out as a notable area of strength.
On profitability, the firm noted Spotify's healthy gross profit margin of 31.85% and pointed out that the company has been profitable over the last twelve months. Raymond James also referenced internal commentary indicating improved monetization and margin flow-through, saying that the first-quarter baseline should position Spotify favorably for the rest of 2026 once normal seasonality is taken into account.
Beyond the headline numbers, Raymond James emphasized Spotify's positioning in the evolving landscape of artificial intelligence. The brokerage pointed to Spotify's existing AI-enabled products and features, along with the technology the company has built, as assets that should allow it to compete in new-music generation and other AI-driven areas. The firm described worries about AI-platform competition as "overdone," and argued that music labels - not technology - are the main bottleneck for Spotify's expansion in AI-related music production.
Investors received further data points from Spotify's reported fourth-quarter results. Earnings per share came in at 4.43, versus an expected 2.85, representing a 55.44% surprise. Revenue for the quarter was reported at 4.5 billion, described in commentary as slightly above the 4.52 billion analysts had anticipated. Those outcomes contributed to a noticeable uptick in pre-market trading following the earnings disclosure.
Raymond James' assessment ties together operational and strategic factors: stable margins and profitability, accelerating monetization dynamics, and an asserted ability to defend against AI-related threats through current products and technological capability. At the same time, the firm continues to view external industry relationships - specifically with music labels - as constraining in the near term.
Market reaction to the combined news - the lowered target but continued bullish rating, plus the reported beat on earnings metrics - has been mixed. The lowered target reflects a reassessment of near-term valuation assumptions, while the maintained Outperform rating and commentary on margins and AI readiness signal continued conviction in the company's longer-term prospects.
Looking ahead, Raymond James' commentary suggests the firm sees Spotify's first-quarter guidance as a constructive baseline that supports the company's outlook for the remainder of 2026, accounting for typical seasonal patterns. The brokerage's balanced framing underscores both operational progress and industry-specific limits that could temper growth in certain AI-enabled streams of revenue.