Spotify Technology (NYSE: SPOT) is pushing meaningfully higher in premarket on Tuesday after the audio streaming giant posted a blockbuster Q4 and issued surprisingly positive outlook for the current quarter.
While the massive headline beat and user growth sure are contributing to it, investors are cheering SPOT primarily for the big boost to efficiency.
For months, they’ve been concerned that it may fail to evolve into a high-margin business.
Today’s release, however, suggested otherwise — helping Spotify stock soar nearly 14% this morning.
What’s driving Spotify stock higher after Q4 earnings?
In Q4, Spotify’s gross margin hit a record 33.1%, which is really the “Holy Grail” for its investors.
Why? Because it confirms that the company’s pivot into audiobooks and “higher-margin” podcast advertising is bearing fruit.
The NYSE-listed company also added 38 million new users in the fourth quarter, the largest quarterly increase in its history, underscoring that even as a mature media services player, it continues to expand its user base and has yet to reach a clear growth ceiling.
Following the post-earnings surge, SPOT stock looks headed to test a “key resistance” coinciding with its 20-day moving average (MA) at the $492 level.
A “decisive break” above that price could accelerate upward momentum in the near-term.
SPOT shares have pushed past last year’s overhang
At €4.43 per share, Spotify topped Street estimates by an exciting “55%”, as social charges related to pesky Swedish payroll taxes that weighed on its stock last year, remained lower-than-expected in Q4.
In fact, the firm’s operating income printed at an all-time high of €701 million, indicating its price hikes in key markets like the US, Estonia, and Latvia are also sitting rather well with users.
Investors ran into Spotify shares this morning because they loved the Q1 guidance as well, calling for “759” million users and continued profitability.
This suggests leadership transition from Daniel Ek to new co-chief executives, Gustav Soderstrom and Alex Norstrom, is going much smoother than the bears anticipated.
All in all, SPOT crashed in the second half of 2025 as markets questioned if it could ever make real money – and the company’s quarterly release on February 10th answered with a resounding “yes”.
Spotify Technology is currently trading at a discount
Long-term investors should consider buying SPOT shares into the post-earnings strength because at a price-to-sales (P/S) multiple of about “4.37” only, they are much cheaper than rival Netflix at roughly “7.7”.
Plus, the audio streaming and media services company is still down some 40% versus its 52-week high as well.
Spotify Technology generated €834 million in free cash flow in the fourth quarter alone, bringing its full-year total to nearly €3 billion, of which it used more than €350 million to repurchase its stock.
This commitment to returning capital to investors via share repurchase makes investing in this firm even more exciting for those interested in holding it for years.
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