Spotify's shares rose by more than 9% - the company expects user growth with the help of AI features

Swedish music streaming platform Spotify is forecasting higher-than-expected operating profit for the fourth quarter. According to the company, new AI-based features could help boost user growth, particularly as the holiday season approaches. Following the news, Spotify's share price rose more than 9% at the start of Thursday's trading session, reaching its highest level since January.

Spotify's new features help users discover music and personalize their listening experience. These include AI DJ, which selects music based on a user's taste and adds commentary, as well as playlists generated from text prompts, allowing listeners to describe their desired mood or musical style.

According to the company's co-CEO, Gustav Söderström, the "About the Song" feature, which lets listeners access facts and stories about a track, is approaching 100 million users. In addition, nearly 40 million Premium subscribers are already using blended playlists.

Profit forecast exceeds expectations

Spotify is forecasting operating profit of €820 million for the fourth quarter, compared with an average analyst estimate of €813.4 million according to a poll by LSEG.

The company also expects growth in Premium subscribers. According to its forecast, the number of Premium subscribers will reach 316 million by the end of the fourth quarter, exceeding analysts' expectation of 314.7 million. Monthly active users are expected to reach 818 million — slightly below the anticipated 819 million.

In the third quarter, Spotify's monthly active users grew 1% quarter-over-quarter to reach 788 million.

AI and new music products

Spotify is using artificial intelligence to help users discover music and increase engagement with the platform. The company continues to develop new products in this area, particularly as platforms like Suno and Udio expand AI-assisted music creation capabilities.

This week, Spotify also signed a licensing agreement with music distributor Believe. The partnership relates to the company's planned paid tool, which will allow users to create AI-assisted covers and remixes. Spotify has similar agreements in place with Universal Music Group, Merlin, and Kobalt.

Revenue and earnings per share fall short of forecasts

Despite the positive outlook, third-quarter financial results fell short of analysts' expectations in some respects. For the three-month period ended September 30, Spotify's revenue totaled €4.97 billion, slightly below the LSEG forecast of €4.98 billion. Earnings per share came in at €2.48, compared with analysts' expectation of €2.80.

Operating profit came in at €672 million, nearly matching analysts' estimate of €671.8 million.

A key question for investors remains whether Spotify can maintain profitability amid rising AI-related spending. According to the company, growth in operating expenses will peak in the third quarter, then slow starting in the fourth quarter, with this trend continuing into 2027.

Spotify's future results will largely depend on how effectively the company can convert its AI features into user growth, subscription revenue, and sustainable profit.