SPOT - Tasty Remix: Power Law Pricing, Premium Growth, UMG Licensing Underpin Updated Outlook

Research evidence excerpt

SPOT - Tasty Remix: Power Law Pricing, Premium Growth, UMG Licensing Underpin Updated Outlook

MEDIA & INTERNET

SPOTIFY TECHNOLOGY S.A. May 21, 2026

Performance vs. 2022 Investor Day

Renewed music industry contracts twice, making business model more sustainable •

Grew marketplace tools gross profit contribution 4x in last 4 years •

Reimagined ads and podcasting businesses; podcasts now in second year of profitability •

Licensed compelling audiobooks catalog across 20+ markets •

Launched global improvements to Spotify Free tier •

Redesigned and reduced org size, resulting in operating leverage •

Customer LTV in U.S. increased >70% since 2022 •

Spotify 2022 Investor Day Key 3-5 Year Financial Targets

2022 Target Current Status

Revenue Growth 20%+ 18% Constant Currency CAGR Through 2025

Gross Profit Growth Faster than Revenue 20.9% (2022-2027E CAGR)

Total Company Gross Margin 30%+ Surpassed in 2024

Total Company Operating Margin ~10% Surpassed in 2024

Source: Company Reports, Guggenheim Securities, LLC estimates

AI Music

Landmark licensing agreement with Universal Music Group enabling fan-created covers •

and remixes represents a new monetization frontier

Partnership spans Universal Music Group and Universal Music Publishing Group •

Both original artists and songwriters share in value created from derivative works •

Launches as a paid add-on; Premium users can try first; all Spotify users (Free and •

Premium) can consume

3.4 trillion taste signals generated daily (up 43% since start of year) •

AI-powered experiences used monthly by nearly 25% of U.S. Premium users •

Subscriber Opportunity

Subscriber opportunity remains substantial with global paid penetration at just 3.5% of •

the world's population

Free user growth: +90% since 2022 Investor Day •