Spotify reported a 1% decline in advertising revenue year on year for Q2 2025, with CEO Daniel Ek acknowledging that the streaming platform has been moving too slowly in developing its advertising business. The slowdown occurred despite strong overall growth in subscribers and monthly active users.
In its Q2 earnings report released on Tuesday, Spotify disclosed that while total revenue grew by 10% to €4.19 billion (approximately US$4.85 billion), it fell short of Wall Street expectations of around €4.27 billion (US$4.9 billion), causing the company’s stock to drop over 11% shortly after the announcement.
The contraction in advertising revenue signals ongoing challenges in monetising Spotify’s ad-supported user base. Ek admitted that the company had been late in innovating and expanding ad products, which slowed advertising revenue growth.
During the earnings call, Ek said Spotify "had been moving too slowly" in building out ad offerings that better capture advertiser demand and maximise the platform’s potential. He stressed commitment to accelerating improvements in ad targeting, product diversity, and measurement capabilities.
Ek added: “The one area that hasn’t yet beaten expectations is our ads business... We have simply been moving too slowly,” calling it “really an execution challenge, not a problem with the strategy.”
Spotify continues to invest heavily in podcasts and audio content, viewed as key areas for targeted ad placements. However, intense competition from platforms like YouTube and TikTok requires Spotify to rapidly evolve its advertising platform to regain momentum.
Despite the dip in ad revenue, user metrics remain strong. Premium subscribers rose 12% year over year to 276 million, adding 8 million during the quarter, while monthly active users increased 11% to 696 million, signalling robust engagement and continued expansion. Ek emphasised that accelerating advertising growth is a top priority to fully leverage Spotify’s massive global user base.
The honest admission about advertising challenges shows Spotify is aware of the tough road ahead, but also confident it can catch up and innovate. As Ek said in his investor letter: “People come to Spotify and they stay on Spotify. By constantly evolving, we create more value for the nearly 700 million people on our platform. That value doesn’t just serve users, it also helps grow the music, podcast, and audiobook industries.”
Looking forward, Spotify expects to hit 710 million monthly users and add another 5 million paid subscribers by the end of the next quarter. The company is betting that by fixing its ad business, it can balance growth between subscription and ad-supported listeners and come out stronger on the other side.
