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Good day, and welcome to Spotify Technology S.A.'s Fourth Quarter 2025 Earnings Call and Webcast. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. I would now like to turn the call over to Bryan Goldberg, Head of Investor Relations. Thank you. Please go ahead.

Thanks, Operator, and welcome to Spotify Technology S.A.'s fourth quarter 2025 earnings conference call. Joining us today will be our Founder and Executive Chairman, Daniel Ek, our Co-CEOs, Alex Norström and Gustav Söderström, and our CFO, Christian Luiga. We will start with opening comments from the team, and afterwards, we will be happy to answer your questions. Questions can be submitted by going to slido.com and using the code #SpotifyEarningsQ425. 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 do not have access to Slido, you can email [email protected], and we will add in your question. Before we begin, let me quickly cover the Safe Harbor. During this call, we will 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 will also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures can be found in our shareholder deck, the financial section of our Investor Relations website, and also furnished today on Form 6-K. And with that, I will turn it over to Daniel.

Alright. Hey, everyone, and thanks for joining. As a short counting exercise has just shown me, this is my thirty-second earnings call. And as you know, this was the last one that I did in the role as CEO. Alex, Gustav, and Christian will give you an overview of the business and cover the quarter. But before I hand it over, I wanted to share a few thoughts. First, I want to say gratitude to the incredible teams at Spotify Technology S.A., to the artists, creators, and authors we build for, the more than three-quarters of a billion people listen with us daily. Thank you. And thank you to all of you as well. I can say that I have generally valued these conversations with our investors, with analysts, and even the tough questions. Getting to build a company like this and to share that journey with people who care about where it is going, it has been a real privilege. From day one, our focus has been simple, build the best experience for listeners, be the best partner for artists and creators, and do it in a way that scales globally. And that remains true almost twenty years in. And for those participating on the call, I know a huge portion of your role is scoring the companies you cover. So if you want a framework for evaluating Spotify Technology S.A. going forward and what to hold us accountable to, I would point to three key things. And then you must also layer on the culture that makes them possible. First, we solve problems at the intersection of consumers and creators. This is where we focus. If something is good for the consumer and also good for the creator, that is where you will find us every time. Discover Weekly, Wrapped, Spotify for Artists, our new mobile free tier, these are not just features, they are proof points. We build tools that help artists reach listeners they would never find otherwise, and in turn, help listeners discover music they did not know they loved. And we built an ecosystem where artists, listeners, creators, authors, and advertisers reinforce each other. That intersection is where we have always won and it is where the next decade gets built. Second, we are first and foremost a technology company. We have said for years that we aim to be the R&D arm for the music industry. If I may say so, nearly twenty years in, I think we have earned that. Drove the shift from downloads to streaming and subscription, and we proved the model could work at scale. But here is what excites me the most. Our capabilities now extend far beyond music. Today, what we built is a technology platform for audio and increasingly for all the ways creators connect with audiences. And this identity will matter even more going forward. The next wave of technology shifts, AI, new interfaces, wearables, new ways of interacting with content, these will reshape how people discover and experience audio and media. The hard problems ahead in music, in podcasts, in books, in video, in live, in things we have not even built yet. We are going to keep building the technology to solve them. Third, play the long game. When we went public in 2018, I talked about long-term value creation. While I know many of you focus quarter to quarter, that is not how we grade ourselves. And it never has been. We chose growth over profitability for many years, and I know that was painful for some of you, but in order to scale, it was the right thing for consumers and creators. And ultimately, for the business we are running today. We acquired The Echo Nest back in 2014 when most people did not understand why a streaming company needed a machine learning AI company. And that bet gave us personalization, something that is now core to everything we do. We built our ubiquity play that is called Spotify Connect starting in 2011, right as we launched in the US. At the time, every major tech platform was building their own walled garden for audio. The conventional wisdom was pick an ecosystem and live inside it. We bet the other way. We decided Spotify Technology S.A. should work everywhere, in your car, your speaker, your TV, your gaming console, regardless of whose ecosystem you are in. Apple’s, Google’s, Amazon, Samsung, Sonos, all of them seamlessly. And today, Spotify works across more than 2,000 devices from over two. And you can start a song on your phone, and you can finish it on your TV. That does not happen by accident. It happens because we choose ubiquity over control. Openness over lock-in, and we stuck with it for over a decade. These were not obvious calls at the time, but they compound. And that long-term orientation will continue to guide Spotify Technology S.A. Which brings me to talent because we take a long-term view there too. At Spotify, we built a culture that tries to build and reward trust. Trust to take risks, trust to fail and learn, trust to challenge each other, and share the thinking behind our decisions. And here is why that matters. Moving fast is not just about how much you ship, it is about shipping the right things. A culture of trust gives you both. People dare to try, but they also dare to debate, to push back, to find the better path together. That is how you iterate quickly without losing direction. If there is trust, most processes are easy allowing you to move very fast. A culture of trust is hard to replicate. It is why we develop leaders from within. And I think Alex and Gustav are great proofs of this. They have been at the center of nearly every major shift in this company, mobile, subscription, machine learning, podcast, audiobooks, marketplace, etcetera, etcetera. They did not inherit Spotify. They really helped building it. And of course, I am not going anywhere. I will be here as Executive Chairman focused on the long term, but this is their moment to lead. And I have deep confidence in them, not because everything will go perfectly, of course it will not, but because I have watched them solve problems that looked impossible. And then do it again and again. And they are not here to protect what I built, they are here to build what we have not imagined yet. And their success is our success and I am rooting very hard for them. And with that, I am going to hand it over to Alex, Gustav, and Christian.

Unless otherwise noted, all referenced growth metrics are presented on a year-on-year constant currency basis. Overall, we are pleased with our strong quarter four finish. Total revenue grew at an accelerated 13% to $4,500,000,000. Premium revenue rose 14% versus 13% last quarter and was primarily driven by subscriber growth. Our advertising business grew 4% versus flat last quarter. On a like-for-like basis, excluding the effects of our podcast optimization strategies, we had roughly 7% advertising growth. We are encouraged by the progress we are seeing in terms of market adoption of our new advertising tools and continue to expect improved growth in 2026. Moving to profitability. Gross margin came in at 33.1%, expanding just over 80 basis points year on year. Our outperformance here was primarily driven by content cost favorability. Operating income of €701,000,000 was €81,000,000 above forecast, of which social charges had a positive impact of €67,000,000 due to share price movements. The remaining variance to guidance was driven by the gross margin outperformance. Finally, free cash flow was $834,000,000 in quarter four, and we ended the quarter with $9,500,000,000 in cash and short-term investments. We repurchased $433,000,000 worth of shares in quarter four and will continue to opportunistically return capital via share buybacks. In summary, quarter four capped off another year of healthy growth, profitability, and cash flow improvement for us. On a full-year basis, 2025 revenue grew 13%, gross profit grew 20%, and operating income grew in excess of 50% to deliver a full-year margin of 13%. And our free cash flow generation improved by approximately $600,000,000 to a record DKK 2,900,000,000. Looking ahead to quarter one, we are forecasting 759,000,000 MAU, an increase of 8,000,000 from quarter four, and 293,000,000 subscribers. In quarter one, which is seasonally our smallest quarter, our subscriber outlook implies net additions of 3,000,000. This is within our historical range for quarter one. The effects of new pricing implementation in quarter one are considered in our forecast and as Alex mentioned, the churn with respect to these price increases is in line with our expectations. In addition, we remain very encouraged by the early benefits we are seeing to our funnel, thanks to the enhanced free tier that we rolled out in late quarter three. We are well positioned for conversion and continued healthy subscriber growth in 2026. We are also forecasting $4,500,000,000 in total quarter one revenue, representing an improved growth rate of approximately 15% versus the 13% we just delivered in quarter four. We are forecasting ARPU growth in the 5% to 6% range. Our revenue outlook also incorporates the effects of unfavorable currency movements which results in an incremental €35,000,000 headwind when compared to prior-quarter exchange rates. We expect a quarter one gross margin of 32.8%, and operating income of $660,000,000. While we do not give full-year guidance for gross margin and operating margin, we are expecting both to improve in 2026. For gross margin, we expect our recent pricing adjustments to help drive revenue growth that outpaces the net content cost growth in 2026. That said, the quarterly progression of our margins could again be variable depending on the timing of disciplined investments in our core and monetization activities. Finally, we expect our free cash flow generation to meaningfully exceed what we generated in 2025, while reflecting progression towards a normalized long-term tax rate. In conclusion, we are confident in our path into 2026 and will make further progress on driving top-line growth, disciplined reinvestments, and expect improved margin and cash flow. With that, I hand it back to you, Bryan.

Okay. Christian here. I just want to fill in, I mean, start with just going back a bit to my own script. We do want to invest, and we will invest in future value when we see we have that opportunity. And that is what we are doing. And creating long-term value is what we are looking for every day. But looking at the gross margin pace here in quarter four going into quarter one, also for next year and the things that drive that, I mean, what I said was that the price increases that we have done here are going to outpace the net content cost in 2026. Remembering also that we are improving our ads business slowly as we go forward, and we feel that will pick up in 2026. We have a marketplace that added both to gross income and margin in 2025 that is also a good tool for us. And finally, as we expand new verticals within the countries that we are in and also to new countries, that is also a good support for our margin development.

Okay. And it looks like one more question from Jessica. This time on capital allocation. Christian, can you provide an update on your views on capital returns given your extremely strong balance sheet?

Thank you, Jessica. Yeah, well, it is a relevant question. We have now a good cash flow and we also have a strong balance sheet. I mean we have said that before. Our primary goal is to reinvest in the business. And as we do that, we actually can increase our growth levels. And when we increase our growth levels, we can get more money to invest back and do that flywheel that Alex talked about in his script. And that is the thing that you have to always remember, that is our first thought every day in this company, to grow the company. And as we have said, if we are going to have room for also returning something to the shareholders, we can do that. And in 2025, we did $510,000,000 in buybacks in the market. That is still an option for us also going forward, especially to cover up for dilution. In addition to that, as you know, we have SEK 1,500,000,000 falling due or plus in convertible note now in March, which we will settle in cash.

Right. Our next question is going to come from Steven Cahall on AI opportunity and priorities. With the stock down approximately a third over the last three months, the market appears to be implying Spotify will be negatively impacted from AI. What do you think the market is missing from how Spotify can benefit from AI, and what are your top priorities so you do not fall behind within this new industry landscape?

So thank you, Steven. As you know, we have said already we do not give full-year guidance on our gross margin. But you are right. I mean, we move into quarter one with an ARPU growth of 5%, 6%. That is a bit faster than we have reported in quarter four, and it incorporates recently announced price increases in markets like the US. And that will flow through our P&L for a portion of the quarter and will improve a bit. But that said also, we have said it repeatedly, and I will say it again, which is very important, except for that we are not guiding on full-year gross margin, is that we actually do invest when we see an opportunity for long-term value. And that said then, the quarterly progression of our margins could again be variable depending on the timing of disciplined investments in our core and the monetization activities that I just mentioned. So keep that in mind. And as we say, we do believe that gross margin and operating margin will improve in 2026.

Alright. Thanks, Gustav, and thanks, Batya. That concludes our Q&A session. I am going to turn the call over now to Alex for some concluding remarks. Thank you, Bryan. So from any vantage point at Spotify, there is a lot to look forward to. In March, we will kick off our twentieth anniversary at South by Southwest. And we are excited to share more about our year of raising ambition and a longer-term vision at our Investor Day on May 21 in New York. So please hold the date. Gustav, Christian, and I are looking forward to seeing you there.