Goldman Sachs Upgrades Spotify (SPOT) to Buy

Goldman Sachs analyst Eric Sheridan upgraded Spotify (NYSE: SPOT) from Neutral to Buy with a price target of $700.00 (from $735.00).

The analyst comments "Ahead of its Q4 2025 earnings report, we preview current industry data and frame the potential financial implications from forward engagement and monetization opportunities for SPOT. In addition, we upgrade the shares from Neutral to Buy while adjusting our 12-month price target to $700 (from $735 prior; ~39% upside from current levels vs. average across our coverage of ~17%). As a follow-up to our downgrade note in September ’25 (link), we address what we see as the key industry and idiosyncratic debates that are most top of mind for investors: 1) How will price increases and/or the launch of premium tier(s) drive ARPU growth going forward? – we frame the scope for multi-year positive outcomes for SPOT’s business model but acknowledge that investor debates around timing & magnitude of price increases/plan tier launches (only recently crystalized with a pricing announcement) have likely acted as a headwind for the shares; 2) What is the forward gross margin trajectory for SPOT, including music (royalty payments, etc.) and non-music (podcast, audiobooks, Partner Program, etc.) COGS? - we see a path for Spotify to achieve steady ~80-100bps of annual gross margin expansion in the next 3-4 years on a range of factors discussed in the note; & 3) How will AI impact the streaming media landscape going forward? - too early to tell. We are surprised how negative investor sentiment has turned with respect to SPOT on the back of the AI theme. In our opinion, we see SPOT as well-positioned to capitalize on/benefit from rising generative AI adoption given it is a) leading global position amongst distribution platforms; b) offering across media types; c) relationships with both large music labels and independent artists/content creators; & d) structural data advantage and existing scaled products to facilitate AI/ML-driven discovery/curation. Looking over a long-term horizon, we see SPOT as well positioned against several long-term operating themes (which are reflected in our above-Street estimates) in the coming years. Among those themes would be: 1) steady Premium subscription price increases (at a regular cadence of 1-2 years and staggered by geography); 2) the introduction of new premium pricing tiers; 3) healthy MAU growth (particularly in emerging markets) and steady conversion of ad-supported users into paid subscribers; & 4) reacceleration of advertising revenue growth in ‘26 & beyond, aided by both the launch/scaling of the Spotify Ad Exchange (SAX) and programmatic ad buying capabilities and monetization of video podcast ad inventory (on the back of recent investments in creator payouts via the Spotify Partner Program). In addition, we see a solid runway for gross profit dollar growth & margin improvement driven by: 1) modestly improving unit economics on core Music product including leverage on royalty payments; 2) leverage on “fixed” expenses within cost of revenues, most notably Podcast expenses; & 3) scaling of high incremental gross margin revenue streams in Advertising. We make no changes to our forward operating estimates at this time (aside from updating for the most recent ending share count, carrying value of JVs & investments and FX rates per the company’s most recent filings & current spot rates). With SPOT shares having re-rated lower in recent months (down (28)% since 10/1/25), we believe the long-term secular growth themes expressed above are now being underappreciated at current levels. As a result, we upgrade our rating from Neutral to Buy and adjust our 12-month PT from $735 to $700."

For an analyst ratings summary and ratings history on Spotify click here. For more ratings news on Spotify click here.

Shares of Spotify closed at $502.19 yesterday.

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