Spotify Has 300 Million Subscribers and Record Margins, Yet Trades a Third Below Its Two-Year High

Spotify ended the second quarter with 300 million paying subscribers and a record gross margin, but at $512.92 the stock still sits 33.6% below its two-year high of $772.60. This Spotify Technology S.A. stock analysis looks at whether the business has outrun the share price, and why our scoring model lands on Hold rather than Buy.

What Is Happening With the Stock Price

Spotify rose 5.1% on Wednesday, October 7, to close at $512.92, for a market value of $105.45 billion. The move came between earnings reports. On weekly closes, the two-year range runs from $373.70 to $772.60, which leaves the shares in the lower half of that range, about 35% of the way up from the low. On daily closes the peak was slightly higher, at $775.90 in late June 2025, so the stock has spent more than a year working through a sizeable pullback even as the business kept improving.

Quality: Is This a Financially Sound Business?

Profitability has moved the right way. Yahoo’s trailing gross margin of 32.8% is low for an internet platform, because most of each euro of revenue is paid out to rights holders, but Spotify posted a record 33.4% in the second quarter. The 13.7% operating margin matches that quarter, when operating income was €655 million. The 18.4% net margin runs above the operating margin because pre-tax profit exceeded operating profit by about €0.85 billion over the past four quarters, through net finance income, and tax benefits in the second half of 2025 also helped. The operating figure is the cleaner guide to the core business.

Return on equity is 44.5% and return on assets 12.2%. The balance sheet is strong: debt-to-equity is 0.06, the current ratio is 2.11 and the quick ratio 1.60, and Spotify held €9.4 billion of cash, restricted cash and short-term investments at the end of June after repaying its exchangeable notes in the first quarter.

Cash flow needs a caveat. Yahoo’s free cash flow figure of $1.7 billion is well below the €3.3 billion (about $3.7 billion) of trailing-twelve-month free cash flow Spotify itself reported, and our model uses Yahoo’s number. In this Spotify Technology S.A. stock analysis, the company’s own figure suggests cash generation is stronger than the 74/100 Quality score implies.

Growth: Does This Company Have Real Upside?

Trailing-twelve-month revenue is $20.3 billion. Spotify reports in euros: Yahoo’s 13.9% revenue growth figure matches the year-on-year increase in second-quarter revenue to €4.78 billion, and the 13.6% compound growth rate Yahoo labels as five-year actually covers 2022 to 2025, when annual revenue rose from €11.73 billion to €17.19 billion. Monthly active users rose 12% to 777 million in the second quarter and Premium subscribers rose 9% to 300 million.

Management guided third-quarter revenue to €5.0 billion, about 17% above the €4.27 billion reported a year earlier, with a 32.9% gross margin and €670 million of operating income. The weak spot is advertising: ad-supported revenue grew just 1% in the second quarter (3% at constant currency). Yahoo has no usable earnings growth figure, and the Growth score of 47/100 is held back by the low gross margin and an EV/Revenue multiple of 5.18.

Opportunity: Is Now a Good Time to Enter?

The valuation is full. The stock trades at 29.48 times trailing earnings per share of $17.40, 34.97 times EV/EBITDA and 11.04 times book value, and Yahoo puts the free cash flow yield at 1.6%. That gives an Opportunity score of 29/100, just below the 30 the model requires for a Buy. On Spotify’s own free cash flow the yield would be closer to 3.5%; by our rough recalculation that would lift Opportunity above 30, but the overall score would still fall short of the Buy threshold.

The price position helps a little: a business with a 74/100 Quality score sitting in the lower half of its two-year range earns some credit from the model’s contrarian component. The risk is that a P/E near 30 leaves limited room for disappointment if subscriber growth slows further or advertising stays flat.

Spotify Technology S.A. Stock Analysis: The Bottom Line

Our Spotify Technology S.A. stock analysis finds a business in better financial shape than its share price suggests: a record gross margin, strong cash generation on the company’s own numbers, very little debt and 300 million subscribers. Against that, mid-teens revenue growth, a weak advertising business and a P/E near 30 limit the upside the model can see. Quality 74, Growth 47 and Opportunity 29 combine into a recommendation score of 50/100, which our model rates as Hold. Buy / Hold / Sell reflects StreetBriefs’ quantitative scoring model, a data-driven starting point for further research, not a personalized recommendation to transact. Spotify’s own guidance of €5.0 billion in third-quarter revenue is the next benchmark to watch.