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Spotify Has Been Soaring and the Rally Might Not Be Over Yet!

Spotify’s raising prices again — and believe it or not, it’s great news for their profits. The stock’s already on fire, but with new features, strong analyst support, and Q1 2025 earnings coming up, there’s still a lot of upside to watch. Let’s break it all down!

April 28, 2025

Check out our video on YouTube: https://youtu.be/nExQnFP3K8k

What's happening:
Spotify plans to raise subscription prices in dozens of countries (mainly Europe and Latin America) this summer by about €1 per individual subscription. No price increase this summer in the U.S. (they already raised U.S. prices in July 2024).

Bigger context:

  • Music industry executives have pressured Spotify and competitors to raise prices, saying subscriptions haven't kept up with inflation.

  • Despite previous hikes, Spotify remains relatively cheap compared to video streaming services.

  • The music industry’s growth is slowing globally, leading to a push for "Streaming 2.0" — more expensive, premium tiers with extra perks like:

    • Early access to music

    • Early access to concert tickets

Spotify’s moves:

  • They’re considering a “super-premium” tier costing an extra $6/month in the U.S.

  • Spotify has already begun quiet price increases in countries like the Netherlands and Luxembourg.

Investor view:

  • Investors are optimistic because Spotify has shown profits and subscriber growth, and SPOT stock is up more than 100% in the past year.

  • Earnings report coming Tuesday, and these moves could be key.

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How This Could Impact Spotify’s Upcoming Earnings:

Revenue Growth 

  • In Spotify’s 2024 10-K, Premium revenue accounted for about 87% of total revenue.

  • Price hikes = immediate top-line revenue boost without needing a proportional subscriber increase.

Gross Margin Improvement 

  • In the 10-K, Spotify mentioned gross margins improving partly due to price optimization and cost control.

  • Higher subscription prices in large markets (even without new services yet) will expand gross margins even further.

User Churn Risk 

  • Spotify's 10-K warns about price sensitivity — meaning churn (subscriber cancellations) could rise if users push back against higher prices.

  • However, since the increases are not happening in the U.S. right now (Spotify's biggest market) and Europe is generally stickier for subscriptions, churn risk should be manageable short-term.

Super-Premium Future Potential 

  • Even though super-premium ($6 add-on) isn’t live yet, if teased during the earnings call, investors may price in future revenue growth.

  • Spotify’s 10-K stresses innovation and monetization of the subscriber base — super-premium aligns perfectly with this strategy.

Disclaimer: The content provided here is for educational purposes only and should not be construed as financial, investment, or professional advice. All opinions expressed are based on personal insights and general market observations. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. We are not responsible for any actions taken based on the information provided.