Spotify Technology SA

While Internet holdings such as Spotify and Shopify have underperformed in recent periods following strong multiyear runs, we believe patience will be rewarded as these unique franchises continue to execute well against large long-term market opportunities. Spotify, in particular, remains a key holding as we see its potential to capitalize on the growing demand for streaming services and its strong user engagement metrics.

While Internet holdings such as Spotify and Sea have underperformed in recent periods following strong multiyear runs, we believe patience will be rewarded as these unique franchises continue to execute well against large long-term market opportunities.

Spotify, a leading audio streaming platform, is well positioned to further monetize its dominant role in global music distribution and discovery through subscription pricing, advertising and tiered subscription offerings, in our view. We believe the upcoming super-premium tier represents a meaningful catalyst. In its most recent quarter, Spotify delivered solid user growth and operating leverage, with revenue and operating income exceeding guidance. Management highlighted improving gross margin trends and reiterated its confidence in its AI-enabled roadmap, including deeper integration with large language models and continued expansion of its advertising network. While shares declined amid broader multiple compression and concerns around advertising trends, underlying fundamentals are improving.

Spotify, along with other high-quality internet platforms, has seen its stock price decline significantly, primarily due to multiple compression rather than fundamental impairment. The market's current valuation multiples are down approximately 40%, creating a lower bar for these companies to outperform. Despite the market's focus on AI, the best internet companies, including Spotify, are poised to leverage AI to deliver value to consumers. With many of these companies trading at P/E ratios typically reserved for slow-growing businesses, the potential for long-term growth remains strong as long as near-term earnings estimates hold.

We initiated a new position in Spotify, the world’s largest audio streaming platform, which operates a global freemium model across music, podcasts, audiobooks, and emerging interactive audio formats. We see a compelling long-term growth opportunity driven by Spotify’s leading scale, high engagement, and a long runway for subscriber growth, pricing, and improved monetization. Pricing power has been supported by personalization, curated playlists, and rising switching costs tied to user data, with limited churn following multiple price increases globally.

We used the spike in volatility to repurchase shares of video streamer Spotify. Despite the short-term weakness in the software sector, we are optimistic about the outlook for international growth stocks and confident that the work we have put into the portfolio in recent quarters positions the Strategy very well for improved outcomes going forward.

We initiated a position in Spotify, a global audio streaming platform with more than 750 million monthly active users. We were attracted to Spotify’s durable, subscription-led growth and improving pricing power and profitability. We took advantage of the recent selloff to initiate a position.

Spotify, for example, is the undisputed global leader in audio streaming. And yet after nearly two decades of building out its platform, the company has only recently turned profitable. We predict that future earnings will be reliably and materially higher than current earnings. Spotify has been one of Montaka’s top holdings over the last three years, during which its stock price increased 10x! And its PE ratio was greater than 75x for much of this period. It looked optically expensive to many investors, yet our detailed first-principles analysis showed it was very cheap.

Spotify has been part of our portfolio for more than seven years, but we have sold approximately 85% of our original position over time. While it has delivered a long-term internal rate of return (IRR) of roughly 13%, we concluded that the strength and durability of its moat did not justify such a large weighting. Much of the realized capital from those trims was redeployed into new ideas. Today, Spotify remains a meaningful 7.8% position, which is more consistent with our view of its competitive advantages and long-term prospects.

Spotify’s share performance lagged despite continued subscriber growth momentum. During Q3 2025, they grew MAUs 11% and Premium subscribers 12%. Uncertainty around the timing of advertising recovery and margin expansion led to multiple compression and a sell-on-news reaction around earnings catalysts. We continue to believe the company's back catalog and 713 million MAUs provide SPOT with plenty of room to take price and think the advertising business should ramp meaningfully over time.