Spotify operating model
Spotify from its 20-Fs: subscribers and ARPU, two segments, social costs, cash, value. Model a two-segment streaming business from its own KPIs, keep a segment reclassification from manufacturing growth, separate share-price-driven items from earning power, carry the forecast five years in three labelled cases, and read what it is worth without mistaking it for a view on the shares.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: spotify operating model.Updated 25 October 2026
Who builds it, and for whatThe model an equity analyst, a media investor or a strategy team builds for a subscription and advertising business from its filings: Premium as subscribers times ARPU, Ad-Supported as users times what each earns, a gross margin for each that is the royalty bargain, and the filed history, the arithmetic and the judgements on separate sheets. Spotify is the subject because its filings pose four reading problems at once: a segment recast, a payroll tax that moves with the share price, a convertible carried at fair value and a year of tax shaped by deferred tax recognition.
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| A | B | C | D | E | F | G | H | I | J | K | L | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Reported | |||||||||||
| 2 | €m unless stated, as filed under IFRS. Blue cells are typed from the documents named on the Sources sheet; nothing here is adjusted. | |||||||||||
| 4 | €m | Unit | FY2023A | FY2024A | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | Notes | |
| 5 | Segments as filed in the 20-Fs, before the 2026 reclassification (Note 23) | |||||||||||
| 6 | Premium revenue | €m | 11,566.0 | 13,819.0 | 15,350.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:Revenue, SegmentsAxis = ck0001639920:PremiumMember. Old segment basis. | ||||||
| 7 | Ad-Supported revenue | €m | 1,681.0 | 1,854.0 | 1,836.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:Revenue, SegmentsAxis = ck0001639920:AdSupportedMember. Old segment basis. | ||||||
| 8 | Revenue | €m | 13,247.0 | 15,673.0 | 17,186.0 | ifrs-full:Revenue. Statement of operations, p. F-5. Unchanged by the recast. | ||||||
| 9 | Premium cost of revenue | €m | 8,231.0 | 9,324.0 | 10,184.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:CostOfSales, PremiumMember. Royalties, distribution, audiobook and (from 2025) video podcast costs. | ||||||
| 10 | Ad-Supported cost of revenue | €m | 1,619.0 | 1,625.0 | 1,506.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:CostOfSales, AdSupportedMember. All podcast content costs sat here before 2025. | ||||||
| 11 | Cost of revenue | €m | 9,850.0 | 10,949.0 | 11,690.0 | ifrs-full:CostOfSales. Statement of operations, p. F-5. | ||||||
| 12 | Premium gross profit | €m | 3,335.0 | 4,495.0 | 5,166.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:GrossProfit, PremiumMember. | ||||||
| 13 | Ad-Supported gross profit | €m | 62.0 | 229.0 | 330.0 | Form 20-F for 2025 (0001628280-26-006874), Note 23. ifrs-full:GrossProfit, AdSupportedMember. | ||||||
| 14 | Gross profit | €m | 3,397.0 | 4,724.0 | 5,496.0 | ifrs-full:GrossProfit. Statement of operations, p. F-5. | ||||||
| 16 | The 2026 segment basis: FY2024 and FY2025 as recast (memo; FY2023 not recast) | |||||||||||
| 17 | Premium revenue, recast | €m | 13,875.0 | 15,391.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix “Segment Reclassification”; untagged. From 1 January 2026 activities not named were moved from Ad-Supported to Premium: about €56m of FY2024 and €41m of FY2025 revenue. | |||||||
| 18 | Ad-Supported revenue, recast | €m | 1,798.0 | 1,795.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix; untagged. Totals are unchanged. | |||||||
| 19 | Premium cost of revenue, recast | €m | 9,352.0 | 10,207.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix; untagged. | |||||||
| 20 | Ad-Supported cost of revenue, recast | €m | 1,597.0 | 1,483.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix; untagged. | |||||||
| 21 | Premium gross profit, recast | €m | 4,523.0 | 5,184.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix; untagged. The gross profit moved is small: €28m in FY2024, €18m in FY2025. | |||||||
| 22 | Ad-Supported gross profit, recast | €m | 201.0 | 312.0 | Q1 2026 Update, 6-K Ex 99.1 (0001140361-26-017211), appendix; untagged. No recast of FY2023 is published. | |||||||
| 24 | Operating costs and profit (consolidated statement of operations) | |||||||||||
| 25 | Research and development | €m | 1,725.0 | 1,486.0 | 1,393.0 | ifrs-full:ResearchAndDevelopmentExpense. p. F-5. | ||||||
| 26 | Sales and marketing | €m | 1,533.0 | 1,392.0 | 1,426.0 | ifrs-full:SalesAndMarketingExpense. p. F-5. | ||||||
| 27 | General and administrative | €m | 585.0 | 481.0 | 479.0 | ifrs-full:GeneralAndAdministrativeExpense. p. F-5. | ||||||
| 28 | Total operating expenses | €m | 3,843.0 | 3,359.0 | 3,298.0 | ifrs-full:OperatingExpense. An unlabelled subtotal on the face of the statement. | ||||||
| 29 | Operating income/(loss) | €m | (446.0) | 1,365.0 | 2,198.0 | ifrs-full:ProfitLossFromOperatingActivities. p. F-5. | ||||||
| 30 | Social costs on share-based compensation (inside the cost lines) | €m | 71.0 | 291.0 | 125.0 | Item 3.D of the FY2024 and FY2025 20-Fs; untagged. Payroll taxes on the intrinsic value of awards, so they move with the share price. The Updates call them Social Charges. | ||||||
| 31 | Share-based compensation expense | €m | 321.0 | 267.0 | 247.0 | ifrs-full:AdjustmentsForSharebasedPayments, cash flow statement p. F-9. Note 5 gives 248 for FY2025 (ExpenseFromSharebasedPaymentTransactionsWithEmployees): a rounding difference in the filing. | ||||||
| 32 | Depreciation of property, equipment and right-of-use assets | €m | 110.0 | 85.0 | 79.0 | ifrs-full:AdjustmentsForDepreciationExpense. Cash flow statement, p. F-9. | ||||||
| 33 | Amortisation of intangible assets | €m | 48.0 | 36.0 | 23.0 | ifrs-full:AdjustmentsForAmortisationExpense. Cash flow statement, p. F-9. | ||||||
| 35 | Finance income and costs, tax and earnings (Notes 7, 8 and 9) | |||||||||||
| 36 | Finance income | €m | 161.0 | 328.0 | 292.0 | ifrs-full:FinanceIncome. p. F-5. | ||||||
| 37 | Of which interest income | €m | 131.0 | 217.0 | 237.0 | ifrs-full:RevenueFromInterest. Note 7. Earned on cash, cash equivalents and short term investments. | ||||||
| 38 | Finance costs | €m | (220.0) | (352.0) | (266.0) | ifrs-full:FinanceCosts, stored positive in the XBRL; shown negative as on the statement. | ||||||
| 39 | Of which fair value movements on the Exchangeable Notes | €m | (98.0) | (239.0) | (123.0) | ck0001639920:LossesOnChangeInFairValueOfBorrowings, stored positive; shown negative as in Note 7. A loss when the share price rises. | ||||||
| 40 | Finance income/(costs), net | €m | (59.0) | (24.0) | 26.0 | ifrs-full:FinanceIncomeCost. p. F-5. | ||||||
| 41 | Income/(loss) before tax | €m | (505.0) | 1,341.0 | 2,224.0 | ifrs-full:ProfitLossBeforeTax. p. F-5. | ||||||
| 42 | Income tax expense | €m | 27.0 | 203.0 | 12.0 | ifrs-full:IncomeTaxExpenseContinuingOperations. FY2025 is 0.5% of pre-tax income after €510m of deferred tax assets were recognised; not a run-rate. | ||||||
| 43 | Tax at the Luxembourg statutory rate | €m | (126.0) | 335.0 | 531.0 | ifrs-full:TaxExpenseIncomeAtApplicableTaxRate. Note 8 reconciliation; the rate was 24.94% in 2023 and 2024, 23.87% in 2025. | ||||||
| 44 | Change in deferred tax recognition (in the tax reconciliation) | €m | 92.0 | (173.0) | (510.0) | ck0001639920:TaxEffectInChangesInDeferredTaxRecognition. Note 8. Negative is a benefit: chiefly US deferred tax assets recognised in 2025. | ||||||
| 45 | Net income/(loss) attributable to owners of the parent | €m | (532.0) | 1,138.0 | 2,212.0 | ifrs-full:ProfitLossAttributableToOwnersOfParent. p. F-5. | ||||||
| 46 | Diluted earnings/(loss) per share | € per share | (2.73) | 5.50 | 10.51 | ifrs-full:DilutedEarningsLossPerShare. FY2023 equals basic: a loss year. | ||||||
| 47 | Weighted average diluted shares | m shares | 194.73 | 206.99 | 210.51 | ifrs-full:AdjustedWeightedAverageShares, in shares; shown in millions. Note 9. | ||||||
| 48 | Weighted average ordinary shares (basic) | m shares | 194.73 | 200.62 | 205.41 | ifrs-full:WeightedAverageShares, in millions. Note 9. | ||||||
| 49 | Dilutive stock options counted in diluted EPS | m shares | - | 4.41 | 3.74 | Note 9, treasury stock method; untagged. Nil in FY2023, a loss year, when every award was anti-dilutive. | ||||||
| 50 | Dilutive restricted stock units counted in diluted EPS | m shares | - | 1.94 | 1.34 | Note 9; untagged. Nil in FY2023 (anti-dilutive). | ||||||
| 51 | Other contingently issuable shares counted in diluted EPS | m shares | - | 0.02 | 0.01 | Note 9; untagged. The notes were anti-dilutive in FY2024 and not counted in FY2025. | ||||||
| 53 | Cash flow (consolidated statement of cash flows, p. F-9) | |||||||||||
| 54 | Net cash flows from operating activities | €m | 680.0 | 2,301.0 | 2,933.0 | ifrs-full:CashFlowsFromUsedInOperatingActivities. | ||||||
| 55 | Purchases of property and equipment (capital expenditures) | €m | 6.0 | 17.0 | 61.0 | ifrs-full:PurchaseOfPropertyPlantAndEquipmentClassifiedAsInvestingActivities; an outflow, stored positive. | ||||||
| 56 | Change in restricted cash (investing) | €m | 4.0 | 1.0 | 2.0 | ifrs-full:CashFlowsFromUsedInDecreaseIncreaseInRestrictedCashAndCashEquivalents. An inflow in each year. | ||||||
| 57 | Free Cash Flow, as reported (non-IFRS) | €m | 678.0 | 2,285.0 | 2,874.0 | Form 20-F for 2025 (0001628280-26-006874), Item 5.B, p. 53; untagged. “Net cash flows from operating activities less capital expenditures and change in restricted cash.” | ||||||
| 58 | Income tax paid | €m | 43.0 | 53.0 | 86.0 | ifrs-full:IncomeTaxesPaidRefundClassifiedAsOperatingActivities, stored positive for a payment. Statement of cash flows. | ||||||
| 59 | Payments of lease liabilities (financing) | €m | 66.0 | 69.0 | 73.0 | ifrs-full:PaymentsOfLeaseLiabilitiesClassifiedAsFinancingActivities. Outside Free Cash Flow. | ||||||
| 60 | Repurchases of ordinary shares | €m | - | - | 439.0 | ifrs-full:PaymentsToAcquireOrRedeemEntitysShares. 768,223 shares in 2025. | ||||||
| 62 | Balance sheet at 31 December (statement of financial position, p. F-7) | |||||||||||
| 63 | Cash and cash equivalents | €m | 3,114.0 | 4,781.0 | 5,258.0 | ifrs-full:CashAndCashEquivalents. FY2023 from the FY2024 20-F. Excludes restricted cash. | ||||||
| 64 | Short term investments | €m | 1,100.0 | 2,667.0 | 4,209.0 | ifrs-full:CurrentInvestments. | ||||||
| 65 | Long term investments (equity stakes at fair value through OCI) | €m | 1,215.0 | 1,635.0 | 2,181.0 | Statement of financial position; custom tag. Listed and unlisted stakes, not cash-like: €1,066m at 30 September 2026. | ||||||
| 66 | Exchangeable Notes, at fair value | €m | 1,203.0 | 1,539.0 | 1,458.0 | US$1,500m, 0%, due 15 March 2026. FY2024 ifrs-full:LongtermBorrowings; FY2025 ifrs-full:CurrentBorrowingsAndCurrentPortionOfNoncurrentBorrowings. | ||||||
| 67 | Lease liabilities, current and non-current | €m | 558.0 | 537.0 | 498.0 | ifrs-full:LeaseLiabilities. Note 10. | ||||||
| 68 | Deferred revenue (current) | €m | 622.0 | 683.0 | 711.0 | ifrs-full:CurrentContractLiabilities. | ||||||
| 69 | Equity attributable to owners of the parent | €m | 2,523.0 | 5,525.0 | 8,329.0 | ifrs-full:EquityAttributableToOwnersOfParent. | ||||||
| 70 | Ordinary shares outstanding (issued less treasury) | m shares | 197.14 | 203.84 | 205.83 | ifrs-full:NumberOfSharesOutstanding, statement of changes in equity; in millions. | ||||||
| 72 | Key performance indicators, as Spotify defines them (Item 5) | |||||||||||
| 73 | Monthly active users (MAUs), period end | m users | 602.0 | 675.0 | 751.0 | Form 20-F for 2025 (0001628280-26-006874), Item 5 KPIs, p. 46; untagged. Users who streamed in the last thirty days of the period. | ||||||
| 74 | Ad-Supported MAUs, period end | m users | 379.0 | 425.0 | 476.0 | Form 20-F for 2025 (0001628280-26-006874), Item 5, p. 46; untagged. | ||||||
| 75 | Premium Subscribers, period end | m subscribers | 236.0 | 263.0 | 290.0 | Form 20-F for 2025 (0001628280-26-006874), Item 5, p. 46; untagged. Registered accounts with a payment method, every Family and Duo account included. Not a subset of the MAU count. | ||||||
| 76 | Premium Subscribers at 31 December 2022 | m subscribers | 205.0 | Form 20-F for 2023 (0001639920-24-000004), Item 5 KPIs. The opening count for the FY2023 average. | ||||||||
| 77 | Ad-Supported MAUs at 31 December 2022 | m users | 295.0 | Form 20-F for 2023 (0001639920-24-000004), Item 5 KPIs. | ||||||||
| 78 | Premium ARPU (the average of the four quarters) | € per month | 4.39 | 4.69 | 4.63 | Item 5; untagged. Quarterly Premium revenue / average daily subscribers / 3. The numerator reads “Premium revenue” (FY2023, FY2024), “Premium subscription revenue” (FY2025). | ||||||
| 79 | Premium ARPU, FY2022 | € per month | 4.52 | Form 20-F for 2023 (0001639920-24-000004), Item 5. | ||||||||
| 80 | Change in Premium ARPU from price increases | € per month | 0.15 | 0.49 | 0.25 | Item 5, the ARPU discussion. The only quantity the filings give for pricing: no dates, markets or rates. | ||||||
| 81 | Change in Premium ARPU from product and market mix | € per month | (0.15) | (0.12) | (0.14) | Item 5. Family, Duo and Student plans and faster growth in lower-priced markets. | ||||||
| 82 | Change in Premium ARPU from foreign exchange | € per month | (0.13) | (0.07) | (0.17) | Item 5, the ARPU discussion; untagged. Revenue is mostly earned in dollars and other currencies and reported in euros. | ||||||
| 83 | Change in Premium ARPU, year on year | € per month | (0.13) | 0.30 | (0.06) | Item 5. Spotify attributes the change “primarily” to the three lines above. | ||||||
| 85 | 2026 so far: nine months to 30 September (6-K, no XBRL tags; segments on the recast basis) | |||||||||||
| 86 | Revenue, nine months 2026 | €m | 14,279.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 87 | Revenue, nine months 2025 | €m | 12,655.0 | Q3 2026 6-K interim statements (0001628280-26-066889), comparative column. | ||||||||
| 88 | Premium revenue, nine months 2026 (recast basis) | €m | 12,966.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 20. | ||||||||
| 89 | Premium revenue, nine months 2025 (recast basis) | €m | 11,371.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 20. | ||||||||
| 90 | Ad-Supported revenue, nine months 2026 (recast basis) | €m | 1,313.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 20. | ||||||||
| 91 | Ad-Supported revenue, nine months 2025 (recast basis) | €m | 1,284.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 20. | ||||||||
| 92 | Gross profit, nine months 2026 | €m | 4,730.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 93 | Research and development, nine months 2026 | €m | 1,151.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 94 | Sales and marketing, nine months 2026 | €m | 1,138.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 95 | General and administrative, nine months 2026 | €m | 399.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 96 | Total operating expenses, nine months 2026 | €m | 2,688.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations (the unlabelled subtotal). | ||||||||
| 97 | Share-based compensation expense, nine months 2026 | €m | 229.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows. | ||||||||
| 98 | Income before tax, nine months 2026 | €m | 2,362.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. Includes the notes’ €184m gain. | ||||||||
| 99 | Income tax paid, nine months 2026 | €m | 196.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows. €82m in the same nine months of 2025. | ||||||||
| 100 | Interest income, nine months 2026 | €m | 154.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 4. €56m in the third quarter. | ||||||||
| 101 | Operating income, nine months 2026 | €m | 2,042.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of operations. | ||||||||
| 102 | Net cash flows from operating activities, nine months 2026 | €m | 2,392.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows. | ||||||||
| 103 | Capital expenditures in the Free Cash Flow reconciliation, nine months | €m | 40.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A Free Cash Flow table. | ||||||||
| 104 | Purchases of property and equipment, statement of cash flows, nine months | €m | 31.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows. €9m less than the reconciliation’s capital expenditures; the filing does not say why (2025 agreed). | ||||||||
| 105 | Change in restricted cash, nine months 2026 | €m | 4.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows and FCF table. | ||||||||
| 106 | Free Cash Flow, nine months 2026 (non-IFRS) | €m | 2,356.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A Free Cash Flow table. | ||||||||
| 107 | Premium ARPU, nine months 2026 | € per month | 4.86 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A. Numerator now “revenue recognized from Premium Subscribers”. | ||||||||
| 108 | Premium ARPU, nine months 2025 | € per month | 4.61 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A comparative; not restated to the new wording. | ||||||||
| 109 | Premium Subscribers at 30 September 2026 | m subscribers | 306.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A KPIs. 281m a year earlier. | ||||||||
| 110 | Premium Subscribers at 30 September 2025 | m subscribers | 281.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A KPIs. | ||||||||
| 111 | Ad-Supported MAUs at 30 September 2026 | m users | 499.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A KPIs. 446m a year earlier. | ||||||||
| 112 | Ad-Supported MAUs at 30 September 2025 | m users | 446.0 | Q3 2026 6-K interim statements (0001628280-26-066889), MD&A KPIs. | ||||||||
| 113 | Social Charges, Q1 2026 | €m | (39.0) | Q1 2026 Update; untagged. A credit: the share price fell in the quarter. | ||||||||
| 114 | Social Charges, Q2 2026 | €m | 1.0 | Q2 2026 Update (0001140361-26-031044); untagged. | ||||||||
| 115 | Social Charges, Q3 2026 | €m | 22.0 | Q3 2026 Update, 6-K Ex 99.1 (0001140361-26-040435); untagged. €13m above Spotify’s guidance, which includes Social Charges at the share price of the quarter’s start and never assumes a move. | ||||||||
| 116 | Cash paid to settle the Exchangeable Notes, March 2026 | €m | 1,304.0 | Q3 2026 6-K interim statements (0001628280-26-066889), statement of cash flows (Repayment of Exchangeable Notes) and Note 15; the fair-value roll-forward is Note 19. US$1,499m at maturity on 15 March 2026. Nil outstanding from 31 March 2026. | ||||||||
| 117 | Fair value gains on the notes in finance income, 2026 (all in Q1) | €m | 184.0 | Q3 2026 6-K interim statements (0001628280-26-066889), Note 4 (movements per Note 19). Not carried into FY2026E: non-cash and not a run-rate. | ||||||||
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Spotify operating model: the workbook
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- The worked model
- 9 sheets and 849 live formulas, all 8 schedules built and linked, every check reading zero. Change an input in Excel and the whole model moves.
- The starter
- The same inputs and layout with the revenue build left blank for you to build, each blank cell marked. The worked model is its answer.
What the base case says
- FY2025A revenue
- $17,186.0m
- FY2025A gross margin
- 32.0%
- FY2025A free cash flow less SBC
- $2,627.0m
- FY2030E revenue, selected case
- $29,188.2m
- FY2030E operating margin
- 18.4%
- Value per share the forecast implies
- 318.99
Read from the workbook as served, every input at its default. Periods: FY2023A, FY2024A, FY2025A, FY2026E, FY2027E, FY2028E, FY2029E, FY2030E. Built from Spotify Technology S.A.’s Forms 20-F for 2023 to 2025 and its 2026 Forms 6-K, cited on the Sources sheet; segments are on the 20-F basis with the 2026 recast as a memo, and the forecast, the discount rate and the terminal assumptions are editorial judgements, labelled on the Forecast sheet, that move with whatever you type in.
What this model is
An operating model of Spotify Technology S.A., the audio streaming service, built from its filed results for 2023 to 2025 and its 2026 quarterly filings, and carried five years forward in three editorial cases.
The Reported sheet holds only what the company filed: revenue, cost of revenue and gross profit for the Premium and Ad-Supported segments, the cost lines, finance income and costs with the Exchangeable Notes’ fair-value element, tax, cash flow, the balance sheet and the KPIs as Spotify defines them, each with its filing and tag. The Derived sheet does arithmetic on them. The Forecast sheet is where judgement enters, and says so on every row.
Uses: modelling a two-segment subscription and advertising business from its own drivers; reading a segment reclassification without splicing two bases; separating a share-price-driven payroll tax, a fair-valued convertible and a deferred tax recognition from earning power; and testing how far a value moves with the discount rate, growth and the royalty bargain behind the gross margin.
Seats: Equity research and hedge funds, Product and technology, Investment banking, Venture capital.
Careers that do this work: growth equity, venture capital, equity research, corp dev / m&a, bizops / strategy & ops.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Revenue build
Where the top line comes from
Reported, rows 6–14 · Derived, rows 6–10 · Forecast, rows 11–19 · Forecast, rows 22–29 · P&L & Cash Flow, rows 6–17 · P&L & Cash Flow, rows 63–68
Operating costs and margins
Cost of sales, opex, EBITDA
Reported, rows 25–33 · Derived, rows 13–18 · Derived, rows 21–33 · Derived, rows 37–43 · Forecast, rows 32–58 · P&L & Cash Flow, rows 20–38
Tax
Tax on profit, and tax on operating profit
Reported, rows 36–51 · Derived, rows 56–67 · P&L & Cash Flow, rows 41–48
Cash flow statement
Indirect method, closing on balance-sheet cash
Reported, rows 54–60 · Derived, rows 46–53 · Forecast, rows 61–70 · P&L & Cash Flow, rows 51–60
Enterprise value to equity value
Debt off, cash on, per share
Reported, rows 63–70 · Derived, rows 70–71 · Valuation, rows 19–34
Unit economics
CAC, payback, LTV, retention, magic number, burn multiple
Reported, rows 73–83 · Derived, rows 74–87
Discounting and terminal value
Discount factors, two terminal methods, reconciled
Forecast, rows 73–75 · Valuation, rows 6–11 · Valuation, rows 14–16 · Valuation, rows 37–40 · Valuation, rows 43–45
Sensitivity tables
Two assumptions at once, without a data table
Sensitivity, rows 5–7 · Sensitivity, rows 10–15 · Sensitivity, rows 18–26
What you should be able to explain
- Why Premium revenue is modelled from average subscribers and ARPU, and why the subscribers x ARPU x 12 proxy does not tie to segment revenue when ARPU is built on average daily subscribers and quarterly revenue.
- Why the gross margin of each segment is the business: royalties are a share of revenue with per-user floors, and the margin moved from 25.6% to 32.0% in two years without a royalty rate ever being disclosed.
- How a segment reclassification is read: keep the filed years on one basis, carry the recast as a memo, and never compute growth across two bases.
- What social costs on share-based compensation are, why they swing with the share price, and why a forecast sets them at nil rather than guessing the price.
- Why the Exchangeable Notes are debt at a 31 December 2025 valuation date though they were settled three months later, and why their fair-value movements and a deferred tax recognition do not belong in a run-rate.
What a reviewer looks for
- Splicing the recast 2024 and 2025 segments onto the old-basis 2023, so Premium growth includes revenue that only moved between segments.
- Treating FY2025 tax of €12m as the run-rate when €510m of deferred tax assets were recognised in the year; the rate before that recognition was 23.5%.
- Adding back social costs on share-based compensation as if they were non-cash, or forecasting them from one year’s figure when they ranged from €71m to €291m and were a credit in two of the last four quarters.
- Taking net income at face value in a year when the notes’ fair-value loss was €239m, or forgetting the notes at the valuation date because they were repaid soon after.
- Adding interest income to free cash flow and the cash balance to the enterprise value, which counts the same euros twice.
- Reading ARPU growth across 2025 and 2026 as like for like when the numerator’s wording changed and earlier figures were not restated.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Three kinds of number, on three sheets: Reported (filed, blue, cited), Derived (arithmetic on Reported, no assumption), Forecast (editorial, blue, labelled). Every other sheet is formulas over them.
- Segments are on the basis of the 20-Fs in every filed year. The 2026 reclassification moved about €41m of FY2025 revenue to Premium and has no FY2023 recast; the recast FY2024 and FY2025 figures are a memo on Reported, and the forecast continues the filed basis.
- Premium revenue is average Premium Subscribers (the mean of year-end counts) times Premium ARPU times 12, adjusted by an editorial proxy ratio. Spotify’s ARPU is built on average daily subscribers and quarterly revenue, so the proxy does not tie to segment revenue; the filed residual is shown on Derived and as a memo on Checks, never as a check.
- FY2026E is anchored to the nine months filed for 2026: the first year of each growth series, the segment gross margins and the cost ratios (the nine-month ratios excluding Social Charges) are set from them, never from guidance. From there margins and cost ratios move linearly to the case’s FY2030E target. Social costs on share-based compensation are nil in the forecast by this page’s convention (Spotify’s guidance includes them at the prevailing share price); the cost ratios exclude them, so the one input is the only place they live.
- Operating cash flow in forecast years is net income plus share-based compensation, D&A, book tax not yet paid in cash and a working capital inflow. Tax is booked at 24% for net income and paid at a cash rate that starts at 10% and reaches the book rate by FY2028E, as the deferred tax assets are used. Free Cash Flow follows Spotify’s definition: operating cash flow less capital expenditures and the change in restricted cash.
- The valuation discounts free cash flow after share-based compensation and lease payments and before interest on cash at 31 December 2025, with a perpetuity-growth terminal value on a terminal year whose working capital is normalised to terminal growth, and an exit multiple as a cross-check. Cash and short term investments are added and the Exchangeable Notes (debt at that date, settled in March 2026) deducted; leases are charged in the cash flows, so their liability is not also deducted; long term equity stakes are left out and shown per share beside the value. The share count is the year-end shares outstanding plus the awards Note 9 counts as dilutive.
- FY2025 tax of €12m reflects €510m of deferred tax assets recognised, and the notes’ fair-value losses run through finance costs in every filed year; the Derived sheet shows each year without them.
Build it yourself
The starter workbook
The revenue build has been cleared: Premium Subscribers, their average, ARPU and Premium revenue, Ad-Supported users, revenue per user and Ad-Supported revenue, the total and the bridge on the P&L & Cash Flow sheet. Rebuild them from the Forecast sheet’s selected drivers so the filed years still tie to Reported and the forecast years carry through to the valuation.
Blanks: Revenue build. Download it beside the worked model.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Build · Lab · ~12 min
Unit Economics
Build an LTV:CAC you could defend under questioning, and answer payback as its own question.
Build · Lab · ~12 min
Product Metrics Tree
Name the right north star for a product shape, and the guardrail your change would break.
Build · Lab · ~15 min
DCF Builder
Build a DCF by hand from revenue to a share price, know how much of it sits in the terminal value, and name the one assumption the answer hinges on.
Build · Lab · ~10 min
Reverse DCF
Read off the growth a share price already assumes, and say whether that is plausible before anyone asks.
Read · Guide · 11 min
SaaS Operating Models: ARR, Sales Capacity, Billings and the Metrics That Follow
Read · Guide · 16 min
How to Build a DCF Model: From Operating Assumptions to a Defensible Valuation
Read · Guide · 13 min
How to Build a Three-Statement Model That Actually Balances
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Apply · Skill
Company Profile
Build a banker-grade one-pager on any company, fast.
Vocabulary: Free Cash Flow (FCF), Stock-Based Compensation (SBC), Gross Margin, GAAP vs. Non-GAAP, Terminal Value, Deferred Tax (DTA and DTL), Convertible Note, Enterprise Value (EV).
Questions about this model
Which figures in this model are Spotify’s and which are the page’s?
Every figure on the Reported sheet is Spotify’s, from its Forms 20-F for 2023 to 2025 and its 2026 Forms 6-K, cited on the Sources sheet with its section and, for the 20-F figures, its XBRL tag; the 6-Ks carry no tags, so their figures are located by note. Every figure on the Derived sheet is arithmetic on those. Every figure on the Forecast sheet is a judgement of this page: subscriber, ARPU and user growth, revenue per user, the margin and cost targets, share-based compensation, social costs, capex, tax, dilution and the valuation inputs. Spotify gives quarterly guidance; none of it is used.
What changed in the segments in 2026, and how does the model handle it?
From 1 January 2026 Spotify moved revenue-generating activities it does not name from the Ad-Supported segment to Premium, to match what its new co-chief executives review. The 2026 filings recast every quarter of 2024 and 2025: about €56m of FY2024 revenue and €41m of FY2025 moved, with little gross profit, and the totals are unchanged. No recast of 2023 is published. The model keeps all three filed years on the 20-F basis so they compare with one another, carries the recast FY2024 and FY2025 figures as a memo with their own margins, and the Checks sheet proves both bases sum to the same revenue and gross profit.
How are share-based compensation and the social costs on it treated?
Share-based compensation is a cost in operating income, in the free cash flow the valuation discounts and in the value per share; adding it back appears only as a memo beside the result. The social costs on it are payroll taxes on the intrinsic value of awards, €71m, €291m and €125m in the three filed years and a credit in two of the last four quarters, so they follow the share price rather than the business. They sit inside the filed cost lines; the Derived sheet shows operating income before them as arithmetic on Spotify’s two figures, and takes them out of R&D, sales and marketing and G&A in proportion, labelled as an allocation. Spotify’s own guidance includes them at the prevailing share price; this page sets them at nil by convention, the forecast’s cost ratios exclude them, and the one input on the Forecast sheet is the only place they appear, so a reader who types a figure in is charged once.
Why does the Premium revenue proxy not tie, and does that matter?
Spotify defines ARPU as quarterly Premium subscription revenue over average daily subscribers, divided by three, and averages the four quarters for the year. The model only has year-end subscriber counts, so average subscribers times ARPU times 12 is a proxy. It lands €12m under Premium revenue in 2025, €223m under in 2024 and €50m under in 2023: the timing of subscriber growth within the year, a numerator that excludes non-subscription Premium revenue, and the averaging all play a part. The residual is shown on the Derived sheet and as a memo on Checks, not as a check. The forecast applies a proxy ratio of -1.0%, an editorial input inside the filed range, which with nine months of 2026 already filed puts FY2026E Premium revenue near €17.6bn.
What is the value per share on the Valuation sheet?
What the selected forecast is worth at 31 December 2025 at the discount rate and terminal growth on the Forecast sheet: free cash flow after share-based compensation and lease payments and before interest on cash, discounted, with the terminal year’s working capital normalised to terminal growth, plus cash and short term investments, less the Exchangeable Notes at fair value, over the year-end shares plus the awards counted as dilutive. Leases are charged in the cash flows, so the lease liability is not deducted as well. Long term equity stakes, chiefly the Tencent Music stake, are left out and shown per share beside the value. It is a consequence of the inputs, not a target, a fair value or a recommendation, and the page never compares it with the share price.
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