Q2‘26: 5% Miss On Subscription Growth Weakness

Research evidence excerpt

Q2‘26: 5% Miss On Subscription Growth Weakness

UpdateMSpotify, Amazon, YouTube), which suggests a more material contribution from

superfan tiers will be required to hit the company's 4-5% 2023-28 ARPU CAGR.

Management said market share improved as Q2 progressed, with significant

recorded-music market-share momentum into Q3, while the new Pandora

agreement and Apple price increases should provide additional pricing benefit in H2.

Margin focus: we see further efficiency action as likely. Adjusted EBITDA margins

contracted 130bps year-on-year, reflecting mix (lower frontline contribution vs e.g.

Virgin, strong Physical sales again) as well as reinvestment of savings into the

business. Given repeated management commentary around driving efficiencies in

the business to improve FCF/EPS, we expect further announcements here in the

coming months and see a net rather than gross savings target as most appropriate.

Strategic focus: Indian paywall. We note that Universal’s decision to paywall new

releases in India presents a tangible opportunity to drive paid conversion in the

market from low levels. That conversion likely takes place gradually and across

several years, but could accelerate net adds in a market Spotify recently sized as a

150mm+ opportunity over the long-term. This could represent >10% of global paid

users by 2030, constituting a powerful tailwind for the industry and for music

labels, over time.

Recorded Music. Q2 Recorded Music revenues were €2,354m underlying ex-

Downtown (+8.7% cc year-on-year), +2.6% above consensus. However, within the

mix, the all important underlying Subscription revenues were €1,252m, growing at

+6.7%, missing consensus by -1.2% and -260bps respectively. The main tailwind was