It has been about a month since the last earnings report for Spotify (SPOT Quick QuoteSPOT - Free Report) . Shares have added about 16% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Spotify due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.

Spotify's Q2 Earnings

Spotify Technology S.A. reported second-quarter 2026 earnings of $3.03 per share, missing the Zacks Consensus Estimate of $3.27 by 7.3%. The company had incurred a loss in the year-ago quarter. Higher marketing, cloud and artificial intelligence spending weighed on the bottom line.

Revenues of $5.55 billion increased 14% year over year on a reported basis and 15% at constant currency. The figure beat the consensus estimate by a slight margin. Premium subscribers reached 300 million, exceeding management’s guidance by one million.

SPOT's User Growth Reaches New Highs

Monthly active users, or MAUs, increased 12% year over year and 2% sequentially to 777 million. Spotify added 16 million MAUs during the quarter, one million below its guidance. Growth was recorded across all regions, with notable strength in Europe and North America.

Premium subscribers rose 9% year over year and 2% from the prior quarter. Net additions totaled seven million, exceeding the company’s forecast by one million. Ad-supported MAUs advanced 14% year over year to 494 million, reflecting continued expansion of Spotify’s global audience.

Spotify's Premium Revenues Gain Momentum

Premium revenues increased 15% year over year to €4.33 billion. On a constant-currency basis, revenues grew 16%, supported by subscriber gains and higher pricing. Premium average revenue per user increased 7% to €4.89, or 7.4% excluding currency effects.

The benefits of price increases were partly offset by product and geographic mix. Management also highlighted improving engagement, with active days among global subscribers increasing. The company continues to add value through services such as Reserved concert-ticket access, personalized podcasts and additional audiobook offerings.

SPOT's Margins Expand Despite Spending

Gross profit increased 21% year over year to €1.60 billion. Gross margin expanded 193 basis points to a record 33.4%, topping management’s forecast of 33.1%. Premium gross margin reached 34.9%, helped by revenue growth outpacing music costs, net of marketplace programs, audiobook expenses and video-podcast costs.

Operating expenses increased 3% to €941 million. Excluding currency movements and social charges, expenses rose 19%, mainly because of temporary investments in marketing, cloud infrastructure and AI initiatives. Operating income climbed 61% to €655 million, while operating margin expanded to 13.7% from 9.7%.

Spotify's Ad Business Starts to Stabilize

Ad-supported revenues increased 1% year over year to €446 million, or 3% at constant currency. Growth in music-advertising impressions was partially offset by softer pricing. Podcast advertising benefited from sponsorship gains across Spotify’s owned and licensed portfolio.

Automated sales channels represented nearly 40% of ad-supported revenues, up from slightly more than 30% in the first quarter. Active advertisers increased 60% year over year. Management completed its price-optimization work and migrated ad inventory to an in-house ad server, supporting its expectation for double-digit advertising growth in the second half of 2026.

SPOT's Cash Flow Supports Buybacks

Free cash flow increased 14% year over year to €797 million, marking a record second-quarter performance. The improvement reflected higher net income adjusted for noncash items, partly offset by working-capital movements. Trailing 12-month free cash flow reached €3.3 billion.

Spotify ended the quarter with €9.4 billion in cash, restricted cash and short-term investments. The company repurchased $662 million of shares through Aug. 3, 30% more than during the comparable 2025 period. It has bought back nearly 2.2 million shares since resuming repurchases in 2025.

Spotify Guides for Continued Q3 Growth

For the third quarter of 2026, Spotify expects MAUs of 788 million, implying 11 million sequential additions. The outlook incorporates product optimization in emerging markets that is intended to improve free-to-paid conversion. Premium subscribers are projected to reach 305 million, representing five million net additions.

Revenues are forecast at approximately €5 billion, indicating 17% year-over-year growth. Spotify expects a gross margin of 32.9% and operating income of €670 million. Management continues to anticipate about €200 million of incremental marketing and AI-related operating expenses in 2026, while expecting full-year gross and operating margins to improve.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -12.06% due to these changes.

VGM Scores

Currently, Spotify has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Spotify has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Spotify belongs to the Zacks Internet - Software industry. Another stock from the same industry, Palantir Technologies Inc. (PLTR Quick QuotePLTR - Free Report) , has gained 7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

Palantir Technologies reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of +92.8%. EPS of $0.41 for the same period compares with $0.16 a year ago.

Palantir Technologies is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of +95.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +8.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Palantir Technologies. Also, the stock has a VGM Score of D.