Hook & thesis. Spotify’s post-earnings pop has a lot of momentum behind it, but this is not a speculative catch-the-momentum call. Management delivered a concrete result on 02/10/2026: record user adds, improving margins and raised operating guidance. Those are fundamental outcomes, not hope. The stock has already moved materially, but the underlying earnings beat and the trajectory of operating income justify upgrading to Buy.
The case is straightforward: scale remains the core moat. Spotify added roughly 38 million new monthly active users in the quarter, bringing total MAUs to about 751 million and premium subscribers to ~290 million. That kind of top-line engine — combined with margin tailwinds and explicit operating income guidance — creates a higher-probability path to meaningful free cash flow over the next year. For investors willing to hold through some multiple volatility, the risk/reward is skewed to the upside.
What the business does and why the market should care.
Spotify operates two main segments: Premium subscription and Ad-Supported (free + ad revenue). The Premium product drives recurring revenue and subscriber economics, while the Ad-Supported business scales reach and monetizes an increasingly engaged advertising inventory (audio and podcasts). The company’s scale is material: it reported record quarterly MAU growth and tangible operating leverage — operating income of roughly €701 million (about 47% year-over-year growth in operating income) and management raised Q1 operating income guidance to about €660 million.
Scale matters because advertising yield and subscription ARPU are both levered to engagement. Spotify’s marketing moments (Wrapped and other seasonal campaigns) and product investments in podcasts and creator tools are converting into user growth and incremental monetization opportunities. With 751 million MAUs and a 290 million premium base, even modest improvements in ARPU or ad fill rates move the needle materially.
Hard numbers backing the upgrade.
| Metric | Figure |
|---|---|
| Latest quarter revenue (reported) | ~€4.53B |
| MAUs (monthly active users) | ~751M (added 38M) |
| Premium subscribers | ~290M |
| Operating income (YoY growth) | €701M (≈47% YoY growth) |
| Market cap | $113.05B |
| P/E | ~39.2 |
| 52-week range | $405 - $785 |
Those figures matter for valuation: Spotify is trading at a forward-ish P/E in the high 30s, reflecting both growth expectations and the market’s prior skepticism about durable margins. But the quarter moved the needle on operating leverage: operating income growth of roughly 47% and raised guidance for Q1 operating income to €660 million suggest management now has more conviction that margin expansion is sustainable. Given the scale of the business, even small percentage improvements in margin convert to large dollar increases in operating cash flow.
Technical & market context — why buying now makes tactical sense.
From a market-structure perspective, the stock has cleared short-term resistance and institutional skepticism is easing. The share price today traded around $487, above the 10-day simple moving average (~$464) and roughly equal to the 20-day SMA (~$487), while still below the 50-day SMA (~$532). Momentum indicators are neutral-to-constructive: RSI sits in the mid-40s and MACD is in early bullish posture. Short interest has been declining (recent settlement shows ~5.8M shorts with days-to-cover around 2.35), suggesting the reopening of a short squeeze risk if positive catalysts continue to hit.
Volume supports the move — average traded volume is roughly 4.7M shares and recent sessions have seen elevated short volume alongside buying interest. That combination can amplify upside on further positive headlines.
Catalysts (what will keep the story moving).
- Rollout of further pricing tiers and targeted price increases for Premium, which management flagged as repeatable in 2026.
- Better-than-expected ad revenue recovery and higher monetization of podcasts/audio ads as partnerships and new formats scale.
- Continued margin expansion as cost discipline and operating leverage from scale drive higher operating income.
- Analyst upgrades and institutional repositioning following the earnings beat — several banks already have targets north of $625, which should support the multiple.
- Product-led growth from creator tools and AI-driven personalization that increases engagement and ARPU over time.
Actionable trade plan (specifics & horizon).
Recommendation: Upgrade to Buy.
Trade parameters (explicit):
- Entry: $480.00
- Primary target: $650.00
- Stop loss: $420.00
- Horizon: long term (180 trading days) — allow time for continued margin expansion, seasonal ad cycles, and analyst multiple re-rating.
Why these levels? Entry at $480 captures a small pullback from the post-earnings pop and aligns with near-term support (around the 20-day SMA). The $650 target is anchored to a reasonable path toward the street’s higher price targets (many banks are above $625) and reflects improved operating cash flow that justifies a richer multiple. The $420 stop protects against a scenario where ad demand collapses or margin improvement proves fleeting; it sits above the recent 52-week low of $405 but gives the position room for normal volatility.
Risk framework and counterarguments.
Spotify is a higher-quality growth business, but it is not without material risks. Consider these items before pulling the trigger:
- Ad revenue sensitivity. If global advertising weakens or Spotify’s ad product monetization disappoints, near-term revenue growth could slow materially and reverse the margin story.
- ARPU/monetization headwinds. Premium ARPU has shown pressure in the past as price hikes and regional mix changes play out; if ARPU trend reverses, the upside to operating income is constrained.
- High valuation leaves less room for error. Trading at ~39x earnings, the stock requires continued execution to avoid multiple compression — a single soft quarter could wipe out much of the recent move.
- Competition and content costs. Competition for audio attention (and for podcast licensing/rights) could push content costs higher, pressuring margins if revenue growth slows.
- Macro / FX and geopolitical risks. Currency headwinds and weaker advertiser budgets in Europe or other key markets could weigh on growth and reported results.
Counterargument to the thesis: One could reasonably argue that the market has already priced in the best-case scenario: strong user adds combined with margin expansion and improved guidance. If subsequent quarters fail to replicate the operating income trajectory or if ARPU declines accelerate, the multiple could revert to the mean and the stock could fall well below our $420 stop. That is a non-trivial risk given the current valuation.
What would change my mind?
I would reconsider the Buy call if one of the following material developments occurs: a) management retracts or fails to meet its updated operating income guidance in the coming quarter; b) premium churn or ARPU contraction becomes persistent leading to lower-than-expected subscriber monetization; or c) advertising revenue shows a durable multi-quarter decline. Conversely, I would move to Add/Speculative Buy if Spotify demonstrates consistent sequential ARPU improvement and ad yield growth while continuing to control content costs — that would justify a higher multiple and potentially accelerate the target timeline.
Conclusion. Spotify’s recent quarter is not a one-off headline snack — it delivered measurable operating leverage and raised guidance, while adding users at scale. That combination is exactly what a growth-at-scale company needs to justify a re-rating. The post-earnings move already reflects part of that upside, but the balance of probabilities favors further appreciation over a 180-trading-day horizon if Spotify executes on ad monetization and premium ARPU stabilization. For disciplined investors, enter at $480.00, use a protective stop at $420.00, and target $650.00. Protect position sizing given valuation sensitivity and watch the next ad-revenue prints closely.
Trade plan summary: Long SPOT, entry $480.00, target $650.00, stop $420.00, horizon long term (180 trading days).