Is SPOT a good stock to buy? We came across a bullish thesis on Spotify Technology S.A. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on SPOT. Spotify Technology S.A.’s share was trading at $519.96 as of March 3rd. SPOT’s trailing and forward P/E were 40.84 and 33.90 respectively according to Yahoo Finance.
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Spotify Technology S.A., together with its subsidiaries, provides audio streaming subscription services worldwide. SPOT delivered a quarter where profitability meaningfully caught up with scale, reinforcing a bullish shift in the investment narrative. Operating margin expanded to 15%, up more than 300 basis points year over year, driven by gross margin improvement and disciplined cost control. Both R&D and SG&A declined as a percentage of revenue even as engagement continued to rise, a combination that underscores emerging operating leverage in a consumer platform of Spotify’s scale.
The growth engine remains firmly intact. Total monthly active users reached 751 million, up 11% year over year with notable sequential acceleration. Premium subscribers grew 10%, supported by price increases that were absorbed with limited churn, demonstrating pricing power. Although ARPU declined year over year, it improved sequentially, suggesting that pricing actions and user mix are beginning to align more constructively. Free cash flow was robust at €834 million for the quarter, giving the company flexibility to continue share repurchases and strengthen its balance sheet.
Advertising remains the primary debate point. Ad-supported revenue declined 3.5% year over year despite ad-supported MAUs rising more than 26%, highlighting a monetization gap. Management attributes this to optimization resets and expects improvement, positioning the weakness as cyclical rather than structural.
While FX tailwinds may moderate and ARPU remains sensitive to geographic mix, Spotify’s expanding margins, strong user growth, and consistent cash generation signal that the platform has transitioned from proving viability to demonstrating durable profitability, supporting a constructive outlook on the stock.
Previously, we covered a bullish thesis on Spotify Technology S.A. (SPOT) by Kroker Equity Research in April 2025, which highlighted the company’s transformation into a profitable, cash-generating platform driven by margin expansion, pricing power, and surging free cash flow. SPOT’s stock price has depreciated by approximately 5.31% since our coverage due to broader macro conditions. Kroker Equity Research shares an identical view but emphasizes long-term monetization durability and expansion into higher-margin verticals.
Spotify Technology S.A. is on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 121 hedge fund portfolios held SPOT at the end of the fourth quarter which was 116 in the previous quarter. While we acknowledge the risk and potential of SPOT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SPOT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
