Table of Contents
a. Demand
Slightly missed revenue estimate & missed guide by 0.5%.
The Foreign Exchange (FX) headwind was a few basis points larger than expected. Constant Currency (CC) growth was in line with expectations.
Slightly missed monthly active user estimates & slightly missed guidance. More on the reasoning for this later.
Slightly beat premium subscriber estimates & slightly beat guidance.
Subscription revenue was driven by a mix of 9% subscriber growth and 7% revenue per user growth (price hikes).
b. Profits & Margins
Beat 33.1% GPM estimate by 30 bps & beat guide by 30 bps.
The modest outperformance was thanks to shifts in growth spend timing and some tax favorability. They would have enjoyed Y/Y expansion across both major segments without this help, but it did extend the progress.
Premium GPM improvement was thanks to strong revenue growth driving fixed cost leverage and audiobook and video podcast content expense favorability.
Podcasting and the aforementioned tax favorability drove the ad-supported GPM improvement.
Beat EBIT estimate by 3% & beat guidance by 4%.
Payroll tax charges tied to equity compensation (social charges) were €9M lower than expected. Without this help, EBIT would have been 1.5% ahead of estimates.
The combination of the temporary GPM help and the social charge favorability drove profit upside for the quarter. Certainly not the highest quality sources of beats, but beats nonetheless.
The smaller degree of Y/Y EBIT leverage compared to GPM was due to a temporary surge in marketing and AI spending that is expected to continue during Q3 before normalizing in Q4 2026.
Headcount growth is currently flat, so the rise in OpEx, as leadership pointed out, is purely variable cost-driven in nature. Their perceived ability to soon slow these expenses down should be very positive for leverage.
Missed €2.75 EPS estimate by €0.14.
Missed FCF estimate by 6.5%.
c. Balance Sheet
€9.4B cash & equivalents.
No debt.
1.7% Y/Y dilution.
Buybacks are up 30% year-to-date.
d. Guidance & Valuation
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