Goldman Sachs maintains a Buy rating on Spotify and raises the 12-month price target to $655

Overview

This is a Q2'26 earnings preview by Goldman Sachs on Spotify Technology S.A. (SPOT.US). The report discusses key debates around the results, including monetization pathways, H2'26 gross margin progression, the impact of AI on competitive positioning and media consumption habits, and the scope for capital returns over the next few quarters. The authors believe Q2 operating performance will be roughly in line with to slightly better than company guidance and raise the price target based on medium- to long-term operating assumptions.

Core views

The core view is that SPOT remains well positioned on long-term themes, including continued Premium subscription price increases, launches of new higher-priced tiers, improved platform economics driven by AI and multi-product innovation, healthy MAU growth and ad-supported user conversion into paid users, and advertising revenue growth from Spotify Ad Exchange, programmatic advertising, and video podcast ad inventory. The AI remix tool and Reserved ticketing together reinforce the upside case for ARPU and margins, but artist participation, launch timing, AI content experience, and trust from rights holders remain key uncertainties.

Analysis framework

The report uses a combination of earnings preview and scenario analysis: on one hand, it tracks operating trends using disclosures from the company's Investor Day, Q1'26 earnings call information, Sensor Tower user data, and consumer data from MIDiA and Luminate; on the other hand, it performs revenue and gross profit sensitivity analysis for the AI music add-on tool based on penetration, price point, royalty sharing, and compute costs, and anchors long-term forecasts near the company's 2030 financial framework.

Methodology notes

• Operating trend trackingSensor Tower MAU tracking

  Use iOS and Android monthly active rankings and MAU trends to observe the health of user growth

  The report uses Sensor Tower data to track Spotify's monthly active user performance in major markets, noting that Q2'26 US MAUs declined 1% year over year while international MAUs grew 6% year over year, to assess whether subscription and user trends are reaching an inflection point.

• Scenario analysisAI remix add-on sensitivity analysis

  Estimate incremental revenue and gross profit from the AI music add-on tool based on penetration and price point

  The report assumes the AI remix tier pays 45% royalty sharing to rights holders and uses 20% of revenue for compute costs, evaluating the contribution to 2030E revenue and gross profit under different price points and Premium user penetration rates.

• Long-term financial modeling2030 operating framework comparison

  Align and compare the Goldman Sachs model with the company's 2030 guidance framework

  Company targets include mid-teens revenue CAGR, 35-40% gross margin, operating margin above 20%, strong free cash flow growth, and 1bn MAUs; the Goldman Sachs model assumes 13.8% revenue CAGR, 36.6% gross margin, operating margin above 21.4%, 16.5% free cash flow growth, and 1.081bn MAUs.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SPOT.US

  Covered name, Spotify Technology S.A.'s US-listed stock.

  Strengths

  It has a large-scale music and audio platform, strong personalized recommendation capabilities, room for Premium subscription price increases, product innovation such as AI and Reserved, and monetization potential in advertising technology and video podcasts.

  Weaknesses

  The AI music product has not yet disclosed pricing or launch timing, and near-term AI-related marketing and R&D investment may pressure Q2 and Q3 profit and loss; the recovery of the advertising business still needs execution to be proven.

  Comparison

  The report uses the company's 2030 guidance as an anchor point; the Goldman Sachs model is slightly above company targets on operating margin and MAUs, and it believes SPOT has relatively strong growth and platform economics characteristics versus Americas Internet coverage.

  Risks

  Insufficient participation from artists and rights holders, AI content harming user experience or trust from rights holders, future price increases leading to user churn, advertising growth missing expectations, and fading demand for AI music.

Key data

• 12-month price target$655.00Raised from $600 to $655.
• Current price$478.14As of the close on July 17, 2026.
• Implied upside37.0%Based on the target price and current price disclosed on the report cover page.
• Market capitalization$100.1bnDisclosed in Key Data of the report.
• Enterprise value$92.2bnDisclosed in Key Data of the report.
• 3-month average daily trading value$1.0bnDisclosed in Key Data of the report.
• 2026E revenue€19,569.4mnUpdated Goldman Sachs forecast.
• 2028E revenue€25,819.6mnUpdated Goldman Sachs forecast.
• 2026E EPS€13.41Raised from the prior forecast of €13.11.
• 2028E EPS€22.03Raised from the prior forecast of €19.74.
• 2030 long-term model revenue CAGR13.8%Compared with the company's mid-teens revenue CAGR framework.
• 2030 long-term model gross margin36.6%Compared with the company's 35-40% gross margin framework.
• 2030 long-term model MAUs1.081bnCompared with the company's 1bn MAUs target.
• AI add-on scenario revenue€285mn to ~€1.1bnThese correspond to examples of 4% global penetration at a €4.00 price point and 8% penetration at a €7.00 price point, respectively.

Impact & implications

The report carries a positive investment implication for SPOT: if Premium price increases, AI music add-ons, Reserved ticketing, and advertising technology upgrades progress smoothly, Spotify can improve ARPU, revenue growth, and gross margin while maintaining user growth. The higher price target reflects Goldman Sachs' more optimistic medium- to long-term operating estimates, but the market still needs to verify the sustainability of AI tool commercialization, rights holder participation, and the recovery in advertising growth.

Risks

• The launch timing, pricing package, and Premium user penetration rate of the AI remix tool remain uncertain.
• Whether top artists and major rights holders choose to participate in AI music services remains a key variable.
• If algorithms excessively push AI-generated content, user experience may decline and relationships with traditional record labels and rights holders may be harmed.
• Consumer interest in AI music generation tools has already shown signs of cooling, which may limit adoption.
• Higher spending on strategic AI projects, marketing, and R&D in Q2 and Q3 may pressure near-term profit and loss.
• Future subscription price increases may lead to user churn or slower conversion of ad-supported users into paid users.
• The recovery in advertising revenue growth depends on execution in Spotify Ad Exchange, programmatic advertising, and monetization of video podcast inventory.

What to watch

• Whether Q2'26 results come in roughly in line with or slightly better than company guidance, especially in user growth, engagement, and gross margin performance.
• Company disclosures on the pricing, packaging, launch timing, and rights holder participation of the AI remix tool.
• H2'26 gross margin progression, and whether AI-related investment moderates in Q4'26 and 2027 as management has implied.
• User engagement with Reserved ticketing after its US launch, its impact on Premium differentiation, and its support for price increases.
• US and international MAU trends, especially growth in emerging markets and the conversion of ad-supported users into paid users.
• Whether advertising revenue recovers in H2'26 and beyond 2027 to the growth path expected by management and Goldman Sachs.
• The scope and pace of capital return plans over the next few quarters.