Spotify Expected to Post Stable Q2 Results as Market Awaits AI Remix Feature Updates

Spotify Technology SA is anticipated to deliver a stable second quarter performance, according to investment bank Jefferies, which maintains a constructive long term outlook whilst acknowledging that the forthcoming earnings release is unlikely to fundamentally alter the investment narrative.

The bank has reaffirmed its Buy rating on the streaming platform alongside a price target of $600, suggesting substantial upside potential from the current trading level of $485. This positioning reflects Jefferies’ expectation of potential catalysts, including a prospective remixing agreement with Warner Music Group and the introduction of artificial intelligence powered remixing capabilities.

For the second quarter, Jefferies projects a gross margin of 33.1%, consistent with company guidance. The analysts note that a typical outperformance of more than 20 basis points, potentially reaching approximately 33.3%, would constitute a reasonable upside scenario. The firm also considers the current Wall Street consensus estimate of 33% gross margin for the third quarter to be achievable, notwithstanding anticipated regulatory charges.

The investment bank forecasts constant currency revenue growth of 15% year on year for both the second and third quarters, aligned with consensus expectations. Second quarter projections include net additions of 6 million premium subscribers and 17 million monthly active users, with potential for MAU figures to exceed estimates due to the company’s Wrapped 20th anniversary campaign.

Jefferies anticipates that investor focus will centre on management commentary regarding new product developments, particularly the timeline and adoption trajectory of the artificial intelligence remixing offering. The analysts acknowledge investor scepticism surrounding uptake rates, characterising remixing as ultimately a “show me” opportunity that they expect will demonstrate positive momentum in the coming months.

Whilst the bank recognises the possibility of reduced operating expenses, it emphasises that cost reductions alone are unlikely to drive a sustained valuation re rating without incremental revenue generation from new product offerings.

Looking towards 2027, Jefferies expects the company to benefit from new product opportunities, additional pricing initiatives and more normalised cost growth patterns. The firm reiterates that tangible evidence of incremental revenue from artificial intelligence remixing features could reignite investor interest in the shares.