Spotify (NYSE:SPOT) has transformed itself from a fast-growing but unprofitable company into a sustainable business with increasing profitability. The music streaming giant, which boasts over 675 million monthly active users, has seen its stock soar over 170% in the past year. With recent improvements in revenue and earnings, investors are wondering—should they buy, sell, or hold Spotify stock in 2025?

Spotify’s Business Model: A Dual Revenue Stream

Spotify stock has benefited from the company’s two-pronged revenue model:

Premium Subscriptions – Users pay a monthly fee for an ad-free experience and exclusive features.

Ad-Supported Model – Free users listen to ads between songs, generating revenue through AI-powered ad targeting.

This structure has driven significant revenue growth, with Spotify’s total revenue climbing from $7.5 billion in 2019 to $15.7 billion in 2024. In its most recent quarter, premium subscription revenue increased 17% year-over-year, while ad-supported revenue grew by 7%.

Can Spotify Sustain Its Profitability?

One of the biggest concerns surrounding Spotify stock has been its struggle with profitability. Unlike Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Netflix (NASDAQ:NFLX), which have strong profit margins, Spotify has historically faced high licensing costs. The company pays royalties to artists, record labels, and publishers—expenses that have consumed up to 70% of its revenue.

However, Spotify has recently taken steps to improve profitability:

Subscription Price Increases – Premium prices were raised in multiple markets without a decline in users.

Cost Reductions – The company cut expenses, including layoffs and reduced podcast spending.

Shift in Strategy – Spotify is now prioritizing profit growth over aggressive user expansion.

These efforts have paid off. In Q4, Spotify reported adjusted net income per share of $1.76—an impressive turnaround from a $0.36 per share loss in the previous year.

Growth Opportunities: Audiobooks, Podcasts, and Emerging Markets

Spotify stock could see further upside from its expansion beyond music streaming. The company has entered the audiobook market, competing with Amazon’s Audible, and now offers 350,000 audiobooks across 10 markets. It also hosts 67 million video podcasts, leveraging content to drive engagement and advertising revenue.

Additionally, Spotify is expanding in emerging markets where streaming adoption is rising. These regions are expected to contribute to long-term user and revenue growth as they mature.

Analyst Forecasts for Spotify Stock

Spotify expects to reach 678 million monthly active users in Q1 2025, adding 3 million new subscribers. Revenue is projected to grow 16.6% year-over-year to $4.2 billion. Wall Street analysts forecast earnings of $2.23 per share for the quarter.

Looking ahead, analysts predict:

2025 Revenue Growth: 15.2%

2025 Earnings Growth: 84.5%

2026 Revenue Growth: 14.2%

2026 Earnings Growth: 24.8%

Despite strong growth expectations, Spotify stock currently trades at 47 times its projected 2026 earnings—a steep valuation compared to Apple’s forward P/E of around 30x.

Should You Buy Spotify Stock Now?

Analyst sentiment on Spotify stock remains mixed. Out of 29 analysts:

17 rate it a “Strong Buy”

2 rate it a “Moderate Buy”

9 recommend holding

1 has a “Strong Sell” rating

Spotify’s share price has already exceeded its 12-month target of $612.22, with the highest analyst estimate at $730—a potential 17.1% upside.

The Verdict: Buy, Sell, or Hold?

Spotify stock has successfully pivoted toward profitability, making it an attractive growth investment. However, risks remain:

Increased Competition – Tech giants like Apple, Amazon, and Google (NASDAQ:GOOGL) could strengthen their music streaming offerings.

Valuation Concerns – Spotify trades at a premium, requiring sustained high growth to justify its price.

Industry Disruptions – AI advancements could reshape the digital music landscape.

For long-term investors who believe in Spotify’s continued profitability and content expansion, the stock may still offer upside. However, given its high valuation, some may prefer to wait for a more attractive entry point.

Featured Image: Freepik

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