Spotify Stock Drops After Q3 Profit Forecast Misses Estimates

Spotify Technology S.A. (SPOT) saw its share price tumble over 11% on Tuesday after the company released a weaker-than-expected profit forecast for the third quarter of 2025. 

While Spotify user growth and premium subscriber numbers beat analyst expectations, the company’s projected earnings fell short—raising investor concerns over its ability to maintain profitability amid growing operational costs and stiff competition.

Spotify Q3 Forecast Disappoints Wall Street

According to Spotify’s latest report, the company expects third-quarter operating income of €485 million ($561 million), missing the €562 million consensus from LSEG data. The shortfall is attributed to increased tax expenses related to employee compensation.

This forecast came despite continued momentum in Spotify premium subscribers, which rose 12% year-over-year to 276 million in Q2 and are expected to reach 281 million by Q3—exceeding analysts’ estimate of 279 million. 

Monthly active users (MAUs) are also projected to hit 710 million, in line with market expectations.

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Spotify Revenue Miss Sparks Investor Reaction

Spotify reported Q2 revenue of €4.19 billion ($4.85 billion), a 10% increase from the previous year. However, this figure missed the anticipated €4.26 billion. 

The company cited unfavorable currency fluctuations as a major factor, impacting revenue growth by approximately 440 basis points.

Looking ahead, Spotify anticipates Q3 revenue of €4.2 billion, again trailing the market's forecast of €4.48 billion. This revenue miss, combined with the profit outlook, triggered a sharp drop in Spotify stock.

Spotify Stock Performance and Chart Analysis

At market close, Spotify stock dropped 11.55%, settling at $620.01, down $80.97 from the previous trading day. As seen in the attached chart, the stock opened with a downward gap and remained under pressure throughout the day, indicating a strong bearish sentiment. 

Though there was minor overnight recovery (+0.34%), the broader sentiment remains cautious.

This sharp Spotify stock drop marks one of the steepest daily losses in 2025, cutting into the company’s 57% year-to-date gain. The drop also reflects increasing skepticism about Spotify earnings 2025 and raises the question: is Spotify stock a buy after this dip?

Competition and Operational Costs

Spotify continues to face mounting competition from tech giants Apple and Amazon, prompting increased marketing efforts. 

These initiatives contributed to an 8% rise in operating expenses during the April–June period. Investors worry that while user growth is strong, profitability may be squeezed if these expenses persist.

Share Buyback Program Update

In an attempt to restore investor confidence, Spotify's board approved a $1 billion boost to its share buyback program, raising the total authorization to $2 billion. 

Around $1.9 billion remains available for repurchase through April 2026. This move may provide some support to the Spotify share price today and over the medium term.

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Conclusion

Spotify's strong user and subscriber growth highlights the platform’s ongoing appeal, but its profitability outlook and revenue miss in Q2 and Q3 forecasts have rattled investors. 

While the updated Spotify buyback program shows confidence from management, the Spotify stock forecast will depend heavily on its ability to control rising costs and navigate growing competition from Apple and Amazon.

As of now, cautious investors may choose to wait for further clarity in upcoming quarters before considering whether Spotify stock is a buy.

FAQ

Why did Spotify stock drop today?

Spotify stock fell due to a weaker-than-expected Q3 profit forecast and a revenue miss in Q2 2025.

How many Spotify premium subscribers are there now?

Spotify reported 276 million premium subscribers in Q2, with projections reaching 281 million in Q3.

Did Spotify beat user growth estimates?

Yes, total monthly active users grew by 18 million to 696 million, surpassing analyst expectations.

What is the new Spotify buyback amount?

Spotify raised its share buyback authorization to $2 billion, with $1.9 billion still available through April 2026.

Is Spotify stock a buy after the drop?

It depends on your risk appetite. While user growth is strong, profitability concerns and competition may impact future performance.