Since the last Investor Day, Spotify has delivered roughly 18% revenue CAGR, expanded gross margins by more than five percentage points, and generated roughly $3.5 billion of free cash flow in 2025 alone. As of Q1 2026, Spotify reached 761 million monthly active users worldwide, with 293 million on paid subscriptions. The stock rose roughly 15% intraday on May 21 following Investor Day. Bank of America reiterated its buy rating.

Led by Co-CEOs Gustav Söderström and Alex Norström, management now frames the future through a long-term “algorithm”: mid-teens constant-currency revenue growth, 35%–40% gross margins, and operating margins above 20% by 2030. By the end of the decade, Spotify is also targeting 1 billion active users and about $100 billion in annual revenue.

I sat down with Christian Luiga, CFO since 2024, after the presentations. “We’re creating long-term value creation and expansion at the same time, and that is what we believe in,” he told me.

Reaching the upper end of the 35%–40% gross margin range depends less on a single breakthrough than on improving the existing model, he said. Revenue growth, improved marketplace economics, a stronger ads business, and high-margin add-ons should all lift profitability over time, he explained. The key variable is how aggressively Spotify reinvests for growth versus allowing more to fall to the bottom line. That trade-off sits alongside a commitment to operating margins above 20%, which Luiga described as the core driver of long-term cash flow.

A focus on customer engagement and retention

Underpinning the story is a shift in how Spotify defines its product and users. The company is evolving into a multi-product platform designed to earn more from different types of listeners rather than optimizing for an “average user.” That increasingly includes “superfans,” a category Spotify views as especially valuable for engagement and monetization. For example, the company announced “Reserved,” a feature that identifies an artist’s most engaged listeners and reserves concert seats for them at a show.

Podcast listeners appear to be highly engaged Spotify users, and the company has indicated that video podcasts further improve audience retention and consumption time.

When I asked how much of the long-term margin expansion would come from pricing versus new monetization layers, Luiga returned to first principles. Spotify’s model starts with engagement in the free tier, using advertising and habit formation to convert users into paying customers. From there, the company experiments with experiences that can eventually become paid add-ons once demand is clear.

He cited the new Universal Music Group deal, with a focus on AI, around “personalized derivatives” of music as an example: users can listen in both free and premium tiers, but creation and deeper participation will sit behind a paywall. That mindset is also visible in products like Audiobooks+, which already has more than 1 million paying users.

“AI will create engagement, personalization, and therefore also drive monetization, with add-ons, but also how we can price our premium over time,” Luiga said.

Retention, Luiga emphasized, remains one of the company’s most important metrics. “It’s much more costly, actually, if people leave than to acquire new customers,” he said, explaining why avoiding churn is key.

Spotify has a designated team that reviews strategic bets weekly, which Luiga said creates speed. “You want to work where you have good colleagues and people are actually friendly, and it’s fun,” he said of Spotify—and that atmosphere was apparent at Investor Day.

Sheryl Estrada
sheryl.estrada@fortune.com

Upcoming event: Join the Fortune Emerging CFO webinar, The Upskilling Imperative: Building Finance Teams for the Future, in partnership with Workday, on Tuesday, June 23, 11 a.m.–noon ET.

AI and automation are reshaping finance—but competitive advantage comes from how CFOs evolve their teams alongside the tech. This conversation digs into the skills gap to close now, where AI creates new openings, and where human judgment still wins. Leading CFOs will share what’s actually working. Subject matter expert: Casey Caram, Principal, Deloitte
Panelists: Jessica Ross, CFO, GitLab; Marie Myers, CFO, Hewlett Packard Enterprise; and Tim Arndt, CFO, Prologis.

You can register here.

Leaderboard

Raj Denhoy was appointed CFO of Route 92 Medical, Inc., a medical technology company. Denhoy has more than 25 years of experience. He joins Route 92 Medical from Establishment Labs Holdings Inc. where he served as CFO for five years. He was previously a managing director and senior medical device equity research analyst with Jefferies LLC, and held medical device equity research analyst positions with banks including J.P. Morgan Securities LLC, and Piper Sandler & Co., among others.

Fiona Tee was appointed CFO of Paymentology, a global issuer-processor. Tee joins Paymentology from Currencycloud, where she spent nine years. She brings more than 25 years of finance leadership experience across fintech and technology.

Big Deal

KPMG's latest quarterly report, "M&A trends in consumer, retail, and hospitality," offers a review of recent trends and data. Some key findings from the report are: deal volume hit a three-year low (down about 24%), but massive strategic acquisitions drove total deal value up 131% year-over-year to $101.4 billion.

Meanwhile, buyers were highly selective, passing on smaller deals to focus on targets with strong operating models and clear integration readiness. And while public deal counts were low, private equity diligence and a strengthening IPO pipeline signal that future deal formation is building beneath the surface, according to KPMG.

Going deeper

"Elon Musk’s SpaceX IPO filing just told us what business he’s betting on for the future—and it’s not rockets," is a Fortune article by Shawn Tully.

Tully writes: "Elon Musk’s creation has essentially re-invented itself from a commercial space pioneer facing relatively mild competition, to an AI-centric player that’s vying for the same dollars and customers, as the hyperscaler crowd led by Microsoft, Google, OpenAI, CoreWeave, and sundry smaller but still formidable participants." You can read more here.

Overheard

"We can intuitively tell when things are created by people who care and, increasingly, when they’re not."

—Ashley Yetman, co-CEO and director of brand strategy at Baldwin&, a creative agency, writes in a Fortune opinion piece titled "Everyone is blaming AI for the death of ‘craft.’ Take a good look in the mirror."