SpotifySPOT

hit 300M premium subscribers at the end of June, a milestone the company called one no audio streaming service has ever reached.

Revenue rose in line with forecasts at 14% while operating income surged 61% year over year, well above management's own guidance.

Spotify also used its Q2 earnings call to announce a new licensing deal with Merlin, a network representing more than 30K independent labels and distributors.

The agreement brings Merlin's artists into Spotify's upcoming AI remix and covers tool, joining Universal Music Group, which signed a similar deal in May.

The tool will let fans create AI-generated covers and remixes of songs, but only with explicit artist consent. Co-CEO Alex Norström framed the product around what he called the "3 C's": consent, credit, and compensation.

Co-CEO Gustav Söderström argued that standard generative music tools will proliferate regardless, but this product cannot exist without Spotify's infrastructure and label relationships.

Spotify plans to launch the tool as a paid add-on, creating a new revenue stream for artists. A research preview will go to a subset of users first, though the company hasn't announced a specific date. Spotify said it doesn't need deals with all major labels before launching, but wants as many as possible.

The AI music context matters here. More than 50% of daily track uploads on streaming service Deezer were AI-generated recently, up from 10% in Jan. 2025. Spotify is positioning its consent-based model as a structured alternative to that flood of synthetic content.

Spotify said 25% of its total users are already engaging with its AI features, including a conversational discovery assistant called "Talk to Spotify."

The cost side is less comfortable

For Q3, Spotify guided to operating income of $735M (€670M), slightly below analyst estimates of $677.8M (€616M).

CFO Christian Luiga flagged that marketing and AI investments are expected to add roughly €200M in incremental operating expenses for the full year.

Spotify also projected 788M monthly active users for Q3, below estimates. Executives attributed the shortfall to deliberate product changes in emerging markets like India and Indonesia, including stricter free-tier limits, designed to push users toward paid subscriptions.