The news: Despite strong subscriptions growth, Spotify’s ad business remains stuck in neutral amid macroeconomic pressures and the slow ramp-up of its ad stack. The streamer’s stock dropped over 10% after Q2 earnings missed expectations on both revenues and profit and the company issued weak guidance for the current quarter.

• Monthly active users (MAUs) grew 696 million in Q2, up 11% YoY, while ad-supported MAUs rose 10% to 433 million.
• Q2 revenues reached $4.53 billion—below analysts’ forecast of $4.61 billion, per CNBC—and operating income declined 20% quarter over quarter to $439.3 million.
• Looking ahead, the company forecasts average revenue per user (ARPU) to be flat YoY.

Zooming out: Spotify is predominantly focused on non-music monetization, like audiobooks, video, and podcasts. Its digital audio competition with YouTube is going well—Spotify is the preferred digital audio brand for 47% of digital listeners ages 12 to 34, per Edison Research, and the no. 2 platform for podcasts behind YouTube. However, employee costs and a weak dollar are dragging down profits.

Sluggish ads: Spotify CEO Daniel Ek said that improvements with its ad business have been “an execution challenge, not a problem with strategy,” indicating that vision may not be the streamer’s biggest ad hurdle right now.

• Although monthly active advertisers grew more than 40% YoY, Spotify CBO Alex Norström said the company’s ad business needs to grow faster.
• “We’ve simply been moving too slowly, and it’s taken longer than expected to see the improvements we initiated to take hold,” Ek said, noting confidence in a “standout” 2025.

Beyond ads: Despite recent setbacks, Spotify remains focused on diversification, leaning into audiobooks, original content, and interactive experiences to drive long-term growth.

• Spotify’s audiobook library has tripled since 2023 to over 400,000 titles, and listening hours grew more than 35% in key markets like the US, the UK, and Australia.
• A new Audiobooks+ tier launched this month, continuing Spotify’s push to make audiobooks a central part of its non-music content offering.
• It debuted a mini-golf game in partnership with Netflix to promote "Happy Gilmore 2."

Our take: Efforts around Spotify’s Ad Exchange are promising, but lagging adoption means early testing and partnerships may have resulted in disproportionate insights. With lower consumer spending and economic uncertainties, B2B planners should model more conservative ad results and balance new ad initiatives with more predictable, proven customer-acquisition channels.