Inside Spotify’s Q3 Call: Free Tier Defense, Ad Sales Recovery and Big Growth Plans

Spotify reported double-digit quarterly revenue and subscriber growth on Tuesday, as its podcast, audiobooks and video offerings helped bring in users and offset a slowdown in the streamer’s advertising revenue growth.

On a call with investors and analysts, CEO/Founder Daniel Ek and Gustav Söderström and Alex Norström, who will succeed Ek as co-CEOs in January, discussed the company’s third quarter earnings. They laid out financial targets for the rest of the year, predicted improvement in advertising revenue in 2026 and announced a partnership with Netflix for video podcasts.

Here is a breakdown of the highlights from the call.    

Growth Targets

Spotify expects to add 32 million net new users, including 8 million net new subscribers, by the end of the year to bring its total number of monthly average users to 745 million. (That compares to 713 million in the third quarter.) An increase in paying users is expected to help Spotify grow its total fourth quarter revenue to 4.5 billion euros ($5.1 billion), up from 4.3 billion euros ($5 billion) in the third quarter. The company said to expect its gross margin to improve to 32.9% on a favorable comparison to margins a year ago, and projected that operating income would rise to 620 million euros ($710 million) from 582 million euros ($682 million).

Expanded Spotify Free Offering

Spotify rolled out global updates for free users during the quarter that executives said make it easier to listen, connect and share music by allowing free users to search and play any song, including songs other users shared with them.  Analysts questioned these moves during the call, but Spotify’s executives defended them, saying they help grow the number of prospective users in the funnel that Spotify can convert to paying subscribers.

“The global rollout of our enhanced free experience was a key contributor [to] bringing millions of new listeners into the Spotify ecosystem,” said Norström. “It’s having a huge impact on engagement and retention, which we know is the key leading indicator of even more growth and even more conversion.”

Execs pointed to other product enhancements being rolled out for paying users, like Spotify’s new partnership with Netflix, which will license 16 video podcasts, as evidence of its video growth ambitions. Spotify also rolled out a version of its app for Apple TV, something it had previously avoided because of the cost, Gustav Söderström said. Spotify was able to use AI to speed up and more affordably create the app, which he said will contribute to the company’s ubiquity strategy by increasing retention and usage across platforms.

Ads Still Struggling

Ad sales growth slowed to just 7% in the third quarter from over 30% in the year-ago quarter on a foreign exchange neutral basis. Earlier this year, Spotify executives acknowledged the company was falling behind on meeting internal targets for ad revenue growth. 

“In quarter two [we] said that we’re a little bit behind and we need more time, but we do see really good progress on the programmatic side,” said Spotify chief financial officer Christian Luiga, adding that the company expects ad revenue from programmatic to eventually compensate for direct sales. “That inflection point is a little bit further out. We’re expecting the growth that we want in the second half of 2026.”

They signed Amazon and Yahoo as new advertisers in the third quarter.