Spotify's Q2 Earnings Miss, Stock Down Amid Video Expansion

Spotify's Q2 earnings missed expectations, causing its shares to plummet. The company's video push may be a victim of its own success and growth ambitions. Bloomberg's Ashley Carman explains on "Bloomberg Tech".

Spotify's second-quarter earnings report, released on July 29, 2025, missed Wall Street's expectations, causing the company's shares to plummet by more than 11 percent. The streaming giant reported $4.85 billion in revenue, a 10 percent increase from the previous year, but also posted a net loss of $99.25 million due to elevated costs and social charges [1].

The company's advertising revenue dipped by 1 percent year-over-year, and CEO Daniel Ek attributed the struggles to execution issues rather than flaws in the broader strategy. The departure of Lee Brown, Spotify's former head of advertising, who joined Doordash as chief revenue officer, was part of an executive shake-up aimed at accelerating the transformation of the advertising business [1].

Despite the setbacks, Spotify's premium subscription revenue rose by 12 percent, reaching 276 million subscribers and 696 million monthly active users. The company's video consumption is growing 20 times faster than audio, with 350 million users watching video on the platform. Additionally, Spotify has expanded its audiobook service to four additional countries and introduced Audiobooks+, a new subscription add-on [1].

The company's video push may be a victim of its own success and growth ambitions. Video consumption is growing rapidly, but it is also cannibalizing Spotify's music streaming business. As the company expands its non-music content offerings, it risks diluting its core music streaming revenue [1].

Investors are eager to see how well Spotify can maintain and grow its margins as it invests more in new products and technology. The company has said it wants its gross profit margins to land between 30%-35% consistently, and it has achieved that goal for the past four quarters [2].

Spotify's user growth blew past investor expectations, with its premium subscriber base jumping 12 percent year-over-year to 276 million globally. The company attributed this growth to successful marketing campaigns in select developing markets and favorable competitive dynamics in certain markets, like TikTok Music shutting down [2].

In conclusion, while Spotify's Q2 earnings missed expectations, the company's video push and expansion into non-music content may be a long-term strategy to drive growth. However, the rapid growth of video consumption could also cannibalize the company's music streaming revenue. Investors will be closely watching Spotify's ability to maintain and grow its margins as it invests in new products and technology.

References:
[1] https://observer.com/2025/07/spotify-capture-15-percent-world-expands-beyond-music/
[2] https://www.axios.com/2025/07/29/spotify-user-numbers-investor-relations