Spotify (SPOT) shares climbed 8.6% on Thursday after the music streaming company issued a fourth-quarter operating income forecast that exceeded Wall Street expectations. The stock gained ground even as a broader selloff in technology shares continued, driven by investor concerns over artificial intelligence spending.

Spotify Technology S.A. added paying subscribers in the third quarter, although both revenue and earnings fell short of forecasts. Management said it expects stronger operating profit before the end of the year. Operating income, which measures the profit left after a company's core operating costs, is the headline profitability figure in Spotify's quarterly guidance.

Spotify Stock Climbs on Profit Forecast

Spotify, which reports in euros, expects fourth-quarter operating income of €820 million, above the €813.4 million analyst estimate compiled by LSEG. The company forecast €5.2 billion in revenue for the final quarter.

Operating income reached €672 million in the September quarter, close to Visible Alpha's €671.8 million estimate. Revenue totaled €4.97 billion, just under forecasts of €4.98 billion. Earnings per share came in at €2.48, below the €2.80 analysts had expected. The company reported a gross margin of 33%, meaning roughly a third of its revenue remained after covering the costs of delivering the service.

Spotify cited higher marketing, cloud and AI costs as a source of pressure on earnings. The spending follows broader industry investment, including Meta's recent AI launches. Management described the costs as temporary.

Premium Subscriber Outlook Beats Estimates

The two audience measures track different groups: premium subscribers pay recurring fees, while monthly active users include listeners on Spotify's free, ad-supported tier. Spotify ended September with 306 million premium subscribers after adding six million during the quarter. It now projects 316 million by December, versus the 314.7 million analyst estimate.

Monthly active users reached 788 million, up 1% from June. Spotify expects 818 million by year-end, slightly below Wall Street's estimate of 819 million.

Other streaming companies face different pressures. Netflix lowered its advertising revenue forecast on Wednesday. Spotify's latest outlook instead centers on growth in paid music subscriptions.

AI Tools Remain a Spending Priority

Spotify uses AI DJ and prompt-based playlists to help users discover music, and it has connected its service with outside AI to handle listening requests. The company also faces emerging AI music services, including Suno and Udio, and is developing licensed features that let fans create covers and remixes.

Co-CEO Alex Norström said Spotify invests when it finds growth opportunities. The company expects costs to moderate after elevated marketing and cloud expenses.

New Licensing Deals Cover AI Remixes

Spotify signed an agreement with Believe on Tuesday for its planned paid remix tool. The deal also covers TuneCore artists — independent musicians distributed through Believe's TuneCore platform — who can approve use of their music and earn royalties. Similar agreements cover Universal Music Group, Merlin, which represents independent labels, and Kobalt, a music publisher.

Spotify plans to offer the tool as a Premium add-on, though it has not set a launch date or price. The company continues to expand its audio products as it seeks subscriber growth and higher profit. Its next quarterly report will show whether the €820 million operating income target, the 316 million premium subscriber projection and the 818 million monthly active user forecast were met, and whether marketing and cloud spending eased as management expects.