Spotify Technology SA (NYSE:SPOT) has Jefferies analysts bullish ahead of the release of its first quarter earnings report, with the firm confident in the streaming platform’s positioning in what it calls a “tough neighborhood.”
"We are positive on the Q1 set up," analysts wrote.
The analysts noted the music industry’s resilience to macroeconomic risks such as tariffs and consumer spending slowdowns.
They expect Spotify to report gross margins of 31.5%, consistent with guidance, but noted that investors will be closely watching for confirmation of continued gross margin variability throughout 2025.
The company’s guidance implies a stepdown in gross margins from Q4, they added.
“We are favorable on these gross margin investments and view them as critical for driving faster revenue growth and gross margin expansion in fiscal 2026,” analysts wrote.
They also expect Spotify to lean into its bundling strategy to drive higher gross margins.
For Q1, Spotify has guided to 2 million net subscriber additions, its lowest uptick since going public, but Jefferies believes a beat of approximately 1 million is likely, supported by ongoing market share gains.
They repeated their ‘Buy’ rating on Spotify with a $730 price target. Shares traded hands at $606 on Friday.
Wall Street analysts on average expect Spotify to report earnings per share of $2.33 on revenue of $4.2 billion when it hands down its earnings on April 29.