Spotify Technology SA (NYSE:SPOT) shares rose sharply in after-hours trading Tuesday, climbing 0.38% to $469.60 following the release of the company’s fourth-quarter 2025 earnings report. The stock closed the regular session at $467.83, marking a 1.77% increase for the day, according to financial data from Google Finance.
The earnings report revealed a fourth-quarter revenue of €4.53 billion, a 6.81% year-over-year increase. Operating expenses decreased by 10.44% to €798.00 million. Net income for the quarter reached €1.17 billion, a substantial 219.89% increase compared to the same period last year, resulting in a net profit margin of 25.91%. Earnings per share came in at €4.43, a 151.70% increase. EBITDA for the quarter was €714.00 million, a 40% increase.
The positive results appear to be bolstering investor confidence, with Spotify’s year-to-date share price return now at 18.64%. Looking further back, the three-year total shareholder return is approximately 300%, while the five-year total shareholder return stands at 45.61%, indicating that long-term investors have seen more substantial gains.
Despite the strong performance, analysts at Simply Wall St suggest the stock remains undervalued, with a fair value estimate of $769.91 – significantly above the current trading price. This assessment is based on expectations of continued growth in premium subscribers and average revenue per user (ARPU), as well as increasing pricing power over music labels. The analysis anticipates several years of high profit growth and increasing free cash flow.
However, the same analysis acknowledges potential risks, including competition from Amazon and Apple. Currently, Spotify trades on a price-to-earnings (P/E) ratio of 36.9x, exceeding the industry average of 29.2x and the fair ratio of 30.9x, though remaining below the P/E ratio of its peers at 65.5x. This premium valuation suggests the market is already factoring in strong earnings growth, leaving limited room for upside if expectations are not met.
Simply Wall St’s analysis highlights four key rewards driving market excitement, but cautions that the narrative could be challenged if competition intensifies or subscriber growth slows. The firm’s analysis does not factor in the latest price-sensitive company announcements or qualitative material.
