Key Points
Spotify is gaining both ad-supported and premium users.
The company's profit margins are expanding.
Shares of Spotify Technology (NYSE: SPOT) popped on Tuesday after the audio streaming leader announced solid growth across its key business metrics.
By the close of trading, Spotify's stock price was up more than 14%.
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Record subscriber adds
Spotify's monthly active users (MAUs) grew by 11% year over year to 751 million in the fourth quarter, despite intense competition from the likes of Apple, Amazon, and Alphabet's YouTube.
Moreover, the streaming platform is successfully enticing free users to pay up for ad-free music, unlimited song skips, and other features. Spotify's premium subscribers increased 10% to 290 million.
In all, Spotify's revenue rose 13% in constant currency to 4.5 billion euros ($5.4 billion).
Better still, Spotify's profitability is improving as its subscriber base expands. Its gross margin increased by 83 basis points to 33.1%.
Spotify's operating income, in turn, jumped 47% to 701 million euros ($834 million).
Management sees more gains ahead
For the first quarter of 2026, Spotify sees its MAUs and premium subscribers growing to 759 million and 293 million, respectively.
"What we've really built is a technology platform for audio -- and increasingly, for all the ways creators connect with audiences," executive chairman Daniel Ek said. "And this identity will matter even more going forward."
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Joe Tenebruso has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Spotify Technology. The Motley Fool has a disclosure policy.
