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Good morning, and welcome, everyone, to the Spotify Third Quarter 2025 Earnings Call. Today's conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Bryan Goldberg, Head of Investor Relations. Please go ahead.

Thanks, operator, and welcome to Spotify's Third Quarter 2025 Earnings Conference Call. Joining us today will be Daniel Ek, our CEO; Alex Norström, our Co-President and Chief Business Officer; Gustav Söderström, our Co-President and Chief Product and Technology Officer; and Christian Luiga, our CFO. We'll start with opening comments from the team and afterwards, we'll be happy to answer your questions. Questions can be submitted by going to slido.com, and using the code #SpotifyEarningsQ325. Analysts can ask questions directly into Slido, and all participants can then vote on the questions they find the most relevant. If for some reason, you don't have access to Slido, you can e-mail Investor Relations at [email protected], and we'll add in your question. Before we begin, let me quickly cover the safe harbor. During this call, we'll be making certain forward-looking statements, including projections or estimates about the future performance of the company. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed on today's call, in our shareholder deck and in filings with the Securities and Exchange Commission. During this call, we'll also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures can be found in our shareholder deck in the financial section of our Investor Relations website and also furnished today on Form 6-K.

Thanks, Gustav, and thanks, everyone, for joining us today. Let me cover the quarter results and then give some perspectives on our outlook. In quarter 3, MAU grew by 17 million to 713 million in total, exceeding our guidance by 3 million. We added 5 million net subscribers finishing at 281 million, up 12% and in line with guidance. Total revenue was EUR 4.3 billion and grew 12% year-on-year on a constant currency basis. Premium revenue rose 13% year-on-year on a constant currency basis, driven primarily by subscriber growth. Our advertising business was consistent with prior year results on a currency-neutral basis. And as expected, our automated ad sales channels saw strong growth in the quarter. On a like-for-like basis, excluding the near-term impacts from the optimization of our licensed podcast and the rollout of the Spotify Partner Program, we had a mid-single-digit constant currency advertising growth. We continue to see 2025 as a transition year for ads business and expect growth to improve in the back half of 2026. Moving to profitability. Gross margin came in at 31.6%, 50 basis points ahead of guidance and expanding roughly 50 basis points year-on-year. Our outperformance here was primarily driven by changes in prior period estimates for rights holder liabilities, nearly all related to the first half of 2025. Excluding these amounts, our gross margin would have been modestly ahead of guidance due to content cost favorability. Operating income of EUR 582 million was EUR 97 million above forecast, of which social charges had a positive impact of EUR 41 million, and that was due to the share price movements. As a reminder, we don't forecast share price movements in our outlook for the business since they're outside of our control. The remaining variance to guidance was driven by favorability in marketing timing, and personnel and related expenses as well as the gross margin outperformance. Finally, free cash flow was EUR 806 million in the quarter. We ended the quarter with EUR 9.1 billion in cash and short-term investments and we repurchased $77 million in shares in quarter 3. Year-to-date and through November 3, we have repurchased $410 million in shares. As we announced last quarter, our focus is to opportunistically buy back shares, primarily to offset the dilution arising from our employee equity programs. If we then look ahead to guidance. In quarter 4, we are forecasting 745 million MAU, an increase of 32 million from quarter 3 and 289 million subscribers. Our subscriber outlook implies net additions of 8 million, which is slightly below prior year net adds due to the expected small amount of churn we see when we raise prices. This year, we have new pricing in more than 150 markets versus 6 in the prior year. In addition, we recently rolled out the enhanced free tier globally, and we are encouraged by the early benefits we're seeing to our funnel. We view this business as set up well for conversion and continued healthy subscriber growth in 2026. We're also forecasting EUR 4.5 billion in total quarter 4 revenue, representing an improved constant currency year-on-year growth rate of around 13% versus the 12% we just delivered in quarter 3. We're also forecasting a year-on-year ARPU growth of around 2% on a constant currency basis. We expect a quarter 4 gross margin of 32.9% and operating income of EUR 620 million. In summary, we are pleased with how the business is tracking into year-end. As Daniel mentioned, we will continue to make investments to generate long-term growth and returns for the company. While this can lead to quarter-to-quarter variability in terms of margin progression, we believe this is the right approach that sets us up well to advance towards our long-term goals. Turning to 2026. While it's too early to provide guidance, I do want to point out that our first quarter gross margin typically sees a sequential step down from the fourth quarter from advertising seasonality, and we expect the same for quarter 1, '26. Beyond this, we are confident in our path and expect '26 to be another year of healthy revenue growth, disciplined reinvestments and margin and cash flow improvement. With that, I'll hand it back to you, Bryan.

Great. Thanks, Christian. Again, if you've got any questions, please go to slido.com, #SpotifyEarningsQ325. We'll be reading the questions in the order they appear in the queue with respect to how people vote up their preference for questions.

And our first question today is going to come from Jason Helfstein on profitability. Can you talk through the puts and takes around gross margins across your premium and advertising segments in the third quarter? And how should we think about gross margins in the fourth quarter and 2026?

Thank you, Jason. Yes, we are happy. Gross margin expansion is happening for the company this year. And as you are pointing out, there is a pressure more on the premium side than on the advertising side. That is really nothing really to worry about. We started this year by letting you know that we are moving -- starting up the SPP program and moving over some of our podcast videos and podcast to utilize that content to give higher quality into the premium side. And when we do that, we recognize that cost now and premium instead of in advertising. That shift doesn't mean anything on the total company level, but it actually then dampens a bit the margin on the premium side, and improves it on the advertising side. As we started this in quarter 1 this year, it will come through all through the year and therefore also impact quarter 4 in the same way.

We've got a related question from Justin Patterson on time spent. You've often talked about a TAM in the billions of users. How do you think about the time spent opportunity for music and non-music content given new categories like audiobooks that have been additive to listening hours?

Yes, Justin. So I think much of this has been said already by both Gustav and Alex around the TAM and the opportunity. But I guess maybe to take a step back and what I think is more important, like what is the super power of this company. And I think the super power of this company is really into mix between building great product experiences and figuring out how to monetize those product experiences at a level which is different from almost any other platform because the reality is we deal with a lot of professional content where there's an expectancy for us to figure out monetization from the start. It's not something we can wait for and figure out in a few years. So that's really the superpower of this company. And when you then look at that from a TAM, not necessarily in numbers of users, but in time spent, it turns out that there's all of this amazing content that's out there, all of these amazing experiences that are out there that, for whatever reason, may not yet be at a user experience that is attractive to people or at a price point that makes it accessible to people. And when you think about Spotify, that's really been at the intersection where we've been innovating. I think not only did we do that for music, not only did we do that for podcasting, but I think with audiobooks, that's certainly been our bet too, which is we just think that there is a lot more people that cares about audiobooks than what the market was showing at the time. And that's part user experience and it's part business model. Now it turns out that there's plenty of other things out there that has considerable time spent that also doesn't necessarily have the right user experience nor the right business model. And when you add AI to the mix of that, there's -- that's a foundational technology that's going to enable totally new user experiences and business models, too. So we're really excited about it. And I think when you look at sort of the AI world at the moment, of course, it's the foundational models and you have the sort of core assistant models that are doing incredibly well. But we aren't yet seeing a lot of these entirely new consumer experiences in AI having massive traction. But we think that there will be over the coming years, and we think we have the opportunity of being a net beneficiary of that.

Okay. Our next question is from Rich Greenfield on advertising. Looking at a 2-year stack of advertising revenue growth, FX neutral, you've decelerated from 31% in the third quarter of 2024 to 7% in the third quarter of 2025. And you've repeatedly talked to softness in pricing over the past several quarters. How do you return to robust ad growth?

All right. Our next question is going to come from Eric Sheridan on -- a follow-up on the advertising. Can you discuss the forward path to revenue growth and gross margin trajectory for your ad-supported efforts? How much is the current advertising environment weighing on your third quarter reported revenue growth? And how do your new partnerships on the DSP side set the operation up for growth in 2026?

Just let me go back a little bit to the answer we just gave, Eric. First of all, on the margin side, as I elaborated in our first question today, the advertising business is actually benefiting from the move of SPP into the premium side, and that will continue through quarter 4. So starting quarter 1, we won't have that year-on-year benefit on the advertising margin. And when it goes to the revenue side, I mean, and getting all these things in place, One of many things that we do this year to improve and drive the advertising revenue is to bring up the auction-based revenue. And you see that, and Alex alluded to that, you can see that in our slides that it is actually growing healthy. And it's more when that inflection point comes when that growth actually surpasses the flatness or slight decline we have in the direct sales. We are not so much focused on the current ad environment because we have so much momentum in this transformation. So we feel very positive about with current situation that we will get into a healthy growth then in the second half of 2026.

And on a specific note, we heard your complaints on the Apple TV app. So we hope you're happy, Rich. You can now use the new app.

Maybe just an addition from my side, too. I think implied in the question is that perhaps there's a comparison of music to music competitors. But in many markets where we act now, Spotify is not just a music service anymore. It is a music podcast and an audiobooks service. In some markets, we haven't yet gotten to with our audiobooks offering. So as you look at our pricing, we are factoring in the value, not just in music, but in all of the verticals that we act as well. And I think this is an important addition to add because in a lot of the markets, their perception of what Spotify is, is just very different than what it is in other markets as well.

All right Great. Thanks, everyone, for the questions. That concludes the Q&A session today. I want to hand the floor back over to Daniel for some closing remarks.

All right. Thanks, Bryan. Well, I think the headline here is quite simple. The business is healthy. We're shipping faster than ever, and we have all the tools we need. We have pricing, product innovation, operational leverage and eventually the ads turnaround to deliver both revenue growth and profit expansion. I said earlier, it all comes back to user fundamentals, and that's where we are. 700 million users who keep coming back, engagement at all-time highs, we're building Spotify for the long term. And as I transition to Executive Chairman, I couldn't be more confident in what's ahead. Alex and Gustav have been instrumental in getting us here, and I'm excited to watch them take Spotify to the next level. Thank you, everyone, for joining today.

Okay. And that concludes today's call. A replay will be available on our website and also on the Spotify app under Spotify Earnings Call Replays. Thanks, everyone, for joining.