Spotify seen delivering steady Q2 results as investors await AI remixing updates

Spotify Technology SA ( NYSE:SPOT ) is expected to report a steady second-quarter performance, with Jefferies maintaining a positive long-term view despite not anticipating a "narrative changing" earnings release. The investment bank reiterated its ‘Bu’y rating and $600 price target, implying upside from current levels of $485, ahead of the company's results, writing that it prefers to remain positioned for potential catalysts including a Warner Music Group remixing agreement and the launch of AI-powered remixing features. For the second quarter, Jefferies forecasts gross margin of 33.1%, in line with Spotify's guidance, while noting that a typical beat of more than 20 basis points to around 33.3% represents a reasonable upside scenario. The analysts also view the current third-quarter Wall Street gross margin estimate of 33% as achievable, despite expected regulatory charges. Jefferies expects constant-currency revenue growth of 15% year over year in both the second and third quarters, in line with consensus estimates. It also forecasts second-quarter net additions of 6 million premium subscribers and 17 million monthly active users, with potential upside to MAUs from Spotify's Wrapped 20th anniversary campaign. The analysts expect investor attention to center on management's comments about new products, particularly the timeline and adoption of an AI remixing offering. "We'll be listening for commentary on AI remixing adoption/timeline, but given investor skepticism on uptake, remixing is ultimately a 'show-me' that we think plays out positively in the coming months," Jefferies wrote.