Long gone are the days of putting a record on, popping in your favorite band’s tape, or loading your music onto your iPod.
Nowadays, just about everyone — me included — uses Spotify to stream their favorite music, turning the company into a global giant with big plans for the future.
Consider this point: Spotify boasts 751 million users, including 290 million subscribers, in 184 markets.
And all those music fans are big business, according to Spotify’s (SPOT) latest financials and C-suite guidance from co-CEOs Gustav Soderstrom and Alex Norstrom.
The company generated an eye-watering €4.5 billion in revenue in the fourth quarter, and 701 million Euros of operating profit.
The good times don’t show much sign of slowing. The company’s guidance calls for additional growth this year, and, in the long term, its CEOs are prepping for the next generation of technology powered by artificial intelligence.
Spotify sales surge AI fueled future
So many already use Spotify that it seems inconceivable the company can keep adding users, but that’s precisely what happened over the past year, as monthly active users swelled 11% to 751 million. That’s a lot of music, podcasts, and audiobook fans.
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“We marked our highest quarter ever for MAU net additions. It’s incredible to think that we now serve over three-quarters of a billion people around the world,” said Norstrom.
And despite paying $11 billion to content creators in 2025, Spotify still had plenty left over to reinvest back into its business, allowing it to drive greater engagement and ultimately, even more revenue and profits.
For example, Spotify has embraced AI to improve its platform in 2026, transitioning itself from simply a “music streaming app” into a truly intelligent audio technology platform.
“Spotify enters this next chapter from a position of strength, aiming to build the first truly intelligent media platform,” wrote Morgan Stanley analyst Benjamin Swinburne in a research report shared with TheStreet. “We anticipate more product tied specifically to leveraging AI and enhancing personalization.”
Spotify’s AI-driven growth strategy is built on four main pillars:
1. Hyper-personalization as a retention engine
Spotify is moving beyond simply recommending music to creating “behavior-driven storytelling.” For instance, it launched “Prompted Playlists” this year, allowing users to build soundtracks for their moods using natural language, enabled by AI chatbots.
2. Expanding the audiobook revolution
Spotify has made a big bet to capture the audiobook market and diversify revenue away from high-royalty music labels. It’s using AI to develop new tools, including page match, which lets users scan a physical book page with their phone to instantly sync the audiobook to that exact moment.
3. AI-Powered translation & global scale
To spur growth in non-English-speaking markets, Spotify is using AI to break down language barriers without the massive cost of human dubbing. By partnering with companies like OpenAI, the company behind ChatGPT, Spotify can translate podcasts into different languages like Spanish, French, or German while preserving the original host’s voice, tone, and cadence.
4. Advanced Advertising Tech (SPAN)
Spotify is increasingly transforming itself into a tech-first advertising company, similar to Meta or Google. Its AI ad-tech tools (Spotify Audience Network) enable advertisers to target listeners based on real-time moods and activities such as running, cooking, or studying.
5. Artist-first generative AI tools
In response to the threats and opportunities posed by AI-generated music, Spotify has formed a generative AI research lab alongside major labels such as Sony, Universal, and Warner. This lab is tasked with developing tools that enable artists to create content more efficiently while also offering new revenue opportunities.
Founder Daniel Ek weighed in on the importance of user-first tools that improve experience during Spotify’s earnings call, saying:
“From day 1, our focus has been simple: build the best experience for listeners… The next wave of technology shifts, AI, new interfaces, wearables, new ways of interacting with content, these will reshape how people discover and experience audio and media.”
What this means for Spotify investors
A more deeply engaged user base means a more valuable user base for advertisers, and Spotify’s C-suite is leaning in to accelerate its opportunity faster than Wall Street expected.
During the company’s earnings call, its co-CEOs said that for Q1, total monthly active users are expected to be 759 million, up 8 million from Q4. Wall Street was anticipating guidance of 752.45 million MAUs, according to Bloomberg consensus, reports Seeking Alpha.
It also expects the number of valuable premium subscribers to reach 293 million, up roughly 3 million.
“Our investments into personalization and AI are paying off,” noted co-CEO Norstrom. “What this ultimately translates into is greater engagement and retention, which unlocks more revenue growth… And with scale comes more opportunity for innovation and margin expansion.”
The company’s profit guidance also exceeded analysts’ hopes. Spotify is guiding for an operating income of €660M in the first quarter. The consensus estimate was €645M. And gross margin is expected to be 32.8%, again beating the 32.3% estimate.
Spotify’s first-quarter revenue outlook matched Wall Street’s expectations of €4.5 billion.
Overall, Spotify has become a staple on devices, with solid growth and the potential to leverage technology, including AI, to drive more revenue per user. That’s a bullish backdrop.
Morgan Stanley’s Swindell agrees. He reinstated Spotify as a “top” pick, and his $650 price target is roughly 35% higher than shares are trading at last check
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