Spotify Stock (SPOT) Underperforming Into Earnings – What To Expect

Spotify’s stock (NYSE:SPOT) has been underperforming of late, with the price 27.85% lower YTD, and 35% down on a rolling 12 month basis. With earnings on deck this morning, there will be plenty of eyes on the company to see how it responds to an earlier drop in profitability.

The quarter will be a test of whether the company can sustain the profitability rebound demonstrated in Q3 after Q2’s abrupt swing to a €0.42 per-share loss. Consensus sits at €2.74 EPS on €4.52B revenue, slightly above management’s €4.5B revenue forecast but below the €4.57B estimate that prevailed immediately after Q3.

EPS has been revised 7.5% lower over the past 30 days while the stock trades at 53.5x trailing earnings, a 30x forward multiple against a 28.5x industry average. Spotify’s ability to deliver €2.74 EPS depends on gross margin execution and the absence of the social-charge volatility that drove Q1 and Q2 profit misses.

What matters is not whether Spotify clears the bar, but how it clears the bar. A beat driven by operating leverage and margin discipline supports the thesis that Q3’s €3.28 EPS was proof of structural improvement rather than a one-quarter anomaly.

The forward guidance will matter more than the reported quarter, particularly any signal that foreign-exchange headwinds or margin compression could pressure 2026 profitability below current Street expectations.

Consensus Estimates

Consensus revenue of €4.52B sits 0.4% above management’s €4.5B guidance midpoint, a negligible gap that reflects the Street’s acceptance of the company’s forecast rather than aggressive positioning. The more meaningful revision occurred between November 4, when Reuters cited Street expectations around €4.57B, and early February, when consensus eased to €4.52B.

EPS consensus at €2.74 represents a 57% year-over-year increase, but the estimate has been revised 7.5% lower over the past 30 days. The downward drift reflects caution on two fronts: first, whether Spotify can replicate Q3’s gross margin performance without the benefit of one-time tailwinds; second, whether social charges tied to share-price movements and compensation structures will resurface as a drag.

Management Guidance and Commentary

“We are being repriced as a platform that can deliver both growth and profitability—the quarter tests whether Q3’s margin expansion was structural or transitory.”

Management’s Q4 revenue guidance of €4.5B, issued on November 4 alongside Q3 results, came in below the Street’s then-prevailing €4.57B estimate. This conservative posture was consistent with Spotify’s pattern throughout 2025 of underpromising relative to consensus, a dynamic that helped drive estimate resets in Q2 and Q3.

The gap between management’s €4.5B revenue forecast and consensus at €4.52B is narrow enough that a modest beat would not constitute a material surprise. What matters is the composition of any beat: revenue driven by premium subscriber growth at higher average revenue per user would be viewed as higher quality than revenue driven by ad-supported user expansion or favorable foreign-exchange movements.

Analyst Price Targets & Ratings

Wall Street remains largely bullish, with 80% of analysts rating shares a Buy or Strong Buy. The consensus target of $732.46 implies 76.6% upside from current levels, though this target reflects pre-correction assumptions about margin expansion that may need revision based on Q4 execution and 2026 guidance.

Sector & Peer Comparison

Spotify trades at a 30x forward P/E multiple, a 5% premium to the 28.5x industry average for internet content and information companies. This valuation sits above Netflix at 28.3x forward P/E despite Netflix generating a 20.6% profit margin versus Spotify’s 8.32%. The premium reflects the market’s expectation that Spotify can expand margins toward mid-teens over the next two to three years through pricing power and operating leverage.

Earnings Track Record

Spotify has missed consensus EPS estimates in three of the last four quarters, a pattern that reflects the company’s difficulty in managing profit volatility tied to social charges and foreign-exchange movements. The 42.1% beat rate over the past 20 quarters sits below the 50% threshold that typically characterizes consistent execution.

Post-Earnings Price Movement History

Spotify’s post-earnings price reactions exhibit a counterintuitive pattern: beats have been punished more severely than misses on average. The Q3 2025 reaction is instructive—despite a 54% EPS beat, the stock declined 3.8% the following day due to management’s conservative Q4 guidance coming in below Street expectations.

Expected Move & Implied Volatility

The options market is pricing an 8.5% move in either direction following Q4 results, indicating traders expect a larger-than-typical reaction. The 78th percentile implied volatility reading suggests current uncertainty is elevated relative to the past year, consistent with the stock’s 34% decline and focus on whether Q3’s profitability rebound can be sustained.

Expert Predictions & What to Watch

Key Outlook: Guidance Will Drive the Trade

Key Metrics to Watch

The setup heading into this print centers on whether Spotify can demonstrate that Q3’s profitability rebound was the start of a structural improvement cycle rather than a one-quarter anomaly. With consensus already pricing in a 57% year-over-year EPS increase and the stock trading at premium valuations, the bar for a positive reaction is elevated.