Spotify Technology SA (NYSE:SPOT) is going into its first quarter earnings report on April 28 with a generally positive setup, according to Jefferies analysts who maintained their ‘Buy’ rating on the music streaming platform.
The analysts have a $650 price target on Spotify, which traded up almost 5% at about $498 on Monday afternoon.
The analysts expect near-term results to benefit from continued gross margin momentum, with typical seasonal strength in Q1 margins and additional support from recent pricing actions in the US.
Jefferies sees potential for Q2 gross margins to rise to around 33.6% or higher, above Street expectations of approximately 33.1%, driven by seasonality and the full-quarter impact of price increases.
They suggested that wholesale and retail pricing changes may provide a more pronounced benefit in the second quarter as their effects fully flow through.
On revenue and subscriber trends, Jefferies does not anticipate major surprises in either Q1 or Q2. It expects Q1 revenue growth to come in broadly in line with guidance, while subscriber additions are seen as slightly ahead of internal expectations, consistent with historical patterns where early-year guidance has tended to be conservative.
For the Q2, the firm expects revenue guidance to align with consensus estimates and notes that subscriber guidance, even if modestly below Street expectations, would likely not be viewed as a material concern given prior-year patterns.
Investor focus is expected to extend beyond the earnings print to Spotify’s upcoming Analyst Day, where Jefferies highlights artificial intelligence as a key area of interest. They pointed to potential updates on commercial agreements related to AI-driven music features, including remixing capabilities, and suggests that investors will be looking for tangible progress in integrating AI tools into the platform.
There is also attention on how Spotify positions itself relative to broader industry developments in AI-generated music and competing offerings from large technology platforms, including Alphabet.
Jefferies also noted that investor discussions have increasingly centered on whether Spotify can demonstrate clear product progress in AI to counter concerns about competitive positioning.
In particular, the market is watching for signals that Spotify can deploy AI music capabilities at scale and avoid a perceived gap versus both large digital service competitors and emerging AI-native music platforms.