Spotify reported a mixed first quarter for 2026, with strong user growth and subscription gains offset by a decline in advertising revenue as the company undertook a major overhaul of its ad-tech infrastructure.

According to a Storyboard18 report, the streaming giant posted an 8 percent rise in total revenue to €4.53 billion during the quarter. However, ad-supported revenue fell 5 percent year-on-year to €385 million, reflecting the impact of a strategic reset in its advertising business.

The decline comes as Spotify spent the last 18 months dismantling and rebuilding its internal advertising stack, transitioning away from legacy direct sales to more automated and programmatic systems. Co-CEO Alex Norstrom described the process as a “tough” but necessary shift to modernise the company’s ad operations and unlock long-term growth.

Despite near-term disruption, automated sales channels have already begun to gain traction, contributing over 30 percent of total ad revenue and continuing to expand. With the rebuild now complete, the company expects stronger momentum in the second half of 2026, supported by new performance-driven tools such as Sponsored Playlists, Carousel Ads and Automated Bidding.

Spotify’s core subscription business remained the key growth driver. Premium revenue rose 15 percent on a constant currency basis, while Monthly Active Users (MAUs) increased 12 percent to reach 761 million globally. The platform’s premium subscriber base also grew 9 percent to 293 million, underlining sustained demand for its paid offerings.

The company also reported a sharp improvement in profitability, with operating income jumping 40 percent to €715 million. Gross margins expanded to 33 percent, marking a 133-basis-point increase year-on-year, highlighting stronger financial efficiency even amid transitional challenges in the ad segment.