Spotify Technology SA (NYSE:SPOT) is expected to post accelerating revenue growth in the second quarter, according to UBS, with results likely to come in largely in line with management's outlook on the back of price increases and stable gross margins.
The bank forecasts second-quarter revenue of €4.8 billion, up 15.6% on a foreign exchange neutral basis, compared with 14.2% growth in the first quarter.
UBS expects 6 million premium net additions, down from 8 million a year earlier, citing longer conversion times tied to new free tier features, a shift in campaign marketing timing and a tougher iOS comparison.
Premium average revenue per user is expected to grow 8.1% year over year on an FXN basis, while advertising revenue growth is expected to improve as the company laps lower podcast inventory from last year, with further acceleration anticipated in the second half as self-serve and programmatic channels expand.
UBS forecasts gross margins expanding 160 basis points year over year to 33.1%, and operating income of €634 million for the quarter.
Looking further out, UBS is largely maintaining its 2026 estimates, projecting €19.4 billion in annual revenue, up 14.3% FXN, and gross margins of 33.3%. The bank expects free cash flow of €3.4 billion in 2026, up 18% year over year, and anticipates Spotify will ramp up share buybacks following the cash repayment of its convertible notes in March.
UBS rates Spotify shares Buy and lowered its price target to $690 from $735, reflecting slightly lower EBITDA estimates on higher opex and a reduced forward multiple. The bank pointed to new AI tools and premium tier offerings as potential drivers of deeper user engagement and improved premium conversion over the medium to long term.