Audio streaming giant Spotify reported double-digit growth in subscribers and monthly active users, but its advertising business declined 1% in Q2 to €453m.
The figure comes a day after ad sales chief Lee Brown announced he is leaving the company to join DoorDash.
The platform, which now counts 276m premium subscribers (+12% year on year) and 696m monthly active users (+11% year on year), said automated sales channels were the largest contributor to overall advertising revenue, which was equal to 5% growth on a constant currency basis.
Meanwhile, the company’s premium revenue grew 12% to €374m, driven by the aforementioned subscriber gains, with H1 2025 net subscribers totalling 30% higher than H1 2024.
This helped deliver an operating profit of €406m in Q2, a 53% year-on-year increase, but a decline from €509m in Q1.
Total revenue grew 10% year-on-year to €4.2bn, below prior guidance, and weak forward guidance resulted in the streaming group’s shares falling over 10% on Tuesday.
“We’ve simply been moving too slowly, and it’s taken longer than expected to see the improvements we initiated to take hold,” founder and CEO Daniel Ek said on the company’s earnings call.
Analysis: An execution challenge
Whilst Spotify’s user engagement continues to strengthen, ad revenue has stagnated despite recent initiatives aimed at driving greater investment.
In April, the streamer launched the Spotify Ad Exchange, or Sax, which allows advertisers to access Spotify’s logged-in users via real-time auction, with full addressability and measurement capabilities.
Podcast inventory was added to the exchange toward the end of the quarter after it launched without it.
In an interview with The Media Leader this spring, UK and Northern Europe sales chief Ed Couchman described that Sax, alongside other new features, will make it “as easy as possible” for advertisers — especially those in the long tail — to buy, create ads and measure efficiency and effectiveness.
The number of monthly active advertisers on the platform did jump 40% year-on-year in Q2, but their lack of impact on total ad revenue implies they comprised a larger number of lower-value customers.
How Spotify is ‘removing friction’ to pursue the long tail
Referencing Brown’s departure, chief product officer Gustav Söderström stressed the “need to see some more progress within ads”, and in light of this indicated “we felt it was the right time for leadership change.”
Growth in impressions sold against music and podcasts was offset in Q2 due to “a softness in pricing and optimisation of our podcast inventory in their owned and licensed portfolio”, according to the company’s earnings report.
Ek maintained the problem is not with Spotify’s ad strategy, but rather the speed of its execution, couching that “not every decision will yield immediate returns and our progress is not always linear”.
The suggestion is the group sees initiatives like Sax as a longer-term play.
“We are recalibrating because we have to move faster to accelerate [ad revenue’s] contributions to our financials,” added chief business officer Alex Norström.
Growth opportunity in video?
On Spotify’s earnings call, video was also highlighted as a strong performer with good business potential, with Söderström stating it has grown “20 times faster” than audio-only consumption since 2024.
Notably, the company claims to have seen a 65% year-on-year increase in global users (350m) streaming video podcasts on the platform.
Not wanting to miss out on the growth potential, Channel 4 became the first UK public-service broadcaster to launch video programming on the platform.
Tom Coare, head of audio at Omnicom media agency OMD, told The Media Leader he was optimistic Spotify would rebound in the latter half of the year, despite increased competition in the UK from digital broadcasters.
“I would be wary of reading too much into a small decline during a period where, for a variety of reasons, advertisers have been relatively cautious with their budgets,” he said.
“Spotify continue to grow their user base and remain a key partner for many of our clients.”
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