Dear Reader,

A few weeks ago, my name appeared in the Epstein files.

I won’t dramatize it. I wasn’t accused of anything. I wasn’t involved.

But I did something most people don’t do when they see something that doesn’t add up.

I spoke up.

Years ago, when I thought a financial tip might help law enforcement understand how Epstein operated, I shared it. Discreetly. Without expecting anything in return.

That instinct… to step forward when something feels wrong… is the same one that led me to warn about the dot‑com bubble… the housing collapse… and several major market dislocations before they became obvious.

And it’s why I’m speaking up again now.

Because something fundamental is shifting in America.

The cost of living no longer matches how much money we make…

We can’t keep our promises to younger generations.

And artificial intelligence is accelerating changes most people are not prepared for.

One Wall Street strategist recently called what’s coming a “violent reset.”

I agree with the direction, if not the language.

There is a line forming between those who understand what’s happening… and those who don’t.

I’ve laid out what I’m seeing and, more important, what you can do about it, in detail.

Click here to read it while you still can.

Regards,

Whitney Tilson
Editor, Stansberry’s Investment Advisory

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Today’s Exclusive News

The Sound of Money: How Spotify Turned Audio Into Profit Power

By Jeffrey Neal Johnson. Article Published: 2/4/2026. 

In Brief

• Spotify is effectively decoupling from broader streaming struggles by using a variable-cost structure that protects margins and drives consistent operating income growth.
• The platform has solidified its role as a global utility by bundling music, podcasts, and audiobooks into a single subscription, enhancing user retention and pricing power.
• Strategic expansion into video podcasting and new distribution partnerships positions the company to capture additional advertising revenue without significant capital expenditure.

While major financial news focuses on the costly streaming wars fought by video powerhouses like Disney (NYSE: DIS), Netflix (NASDAQ: NFLX), and Amazon (NASDAQ: AMZN), a less-publicized — and arguably more definitive — success story is playing out in the entertainment sector’s audio segment. The battle for video eyeballs has become a war of attrition, defined by escalating production budgets and subscribers who often cancel as soon as a hit show ends.

In contrast, Spotify Technology (NYSE: SPOT)has carved out a near-monopoly position in audio, evolving from a simple music app into a broad global utility.

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Spotify’s recent stock action reflects a market in transition. As of early February, shares were trading near $475, a year-to-date decline of roughly 18%. Looking past short-term price swings, the business appears to be decoupling from the broader entertainment sector’s struggles. While many video competitors fight for razor-thin margins, Spotify reported operating income of €582 million (about $688 million) in the third quarter of 2025.

That divergence suggests Spotify’s underlying financials are strengthening even as the stocksuffers investor fatigue — potentially creating a buying opportunity for investors who want exposure ahead of the next earnings report.

Why Spotify’s Margins Are Expanding While Others Struggle

To see why Spotify is improving fundamentally while the stock lags, consider the difference between fixed and variable cost structures. Video streaming services operate on a high-fixed-cost model: they spend billions up front on original content with no guarantee audiences will watch. If a show flops, that capital is largely sunk.

By contrast, Spotify runs a largely variable-cost model: it pays royalties only when a user listens to a track. That protects the company from the hit-driven risks that plague video platforms — if an album underperforms, Spotify hasn’t lost millions in production costs.

The efficiency shows up in the numbers. In Q3 2025, Spotify hit several milestones:

• Gross margin: Expanded to 31.6%, up 53 basis points year-over-year.
• Operating income: €582 million (about $688 million), an operating margin of 13.6%.
• Free cash flow: Reached a Q3 record of €806 million (approximately $953 million).

This improvement is also the result of the company’s “Year of Efficiency”, during which management right-sized personnel and marketing costs. Spotify has also boosted profitability beyond recent price increases. A key driver is its two-sided marketplace strategy, known as Discovery Mode.

In Discovery Mode, artists and labels accept a lower royalty rate in exchange for algorithmic promotion. The arrangement creates a financial win-win:

• For artists: Increased streams and discoverability.
• For Spotify: Improved gross margins by paying slightly less on promoted streams.

More Than Music: Spotify as a Utility

With roughly 713 million monthly active users (MAUs), Spotify has become as essential to many listeners as electricity or internet service. It functions as the default operating system for global audio consumption, which gives the company meaningful pricing power — a luxury many video competitors lack.

Between 2024 and 2026, Spotify implemented price increases in over 150 markets. In the video world, price hikes often trigger higher churn, but Spotify experienced minimal cancellations after its adjustments, underscoring the platform’s stickiness. Users spend years curating playlists and training the algorithm (via features like the AI DJ), creating high switching costs — it’s simply inconvenient to rebuild a music library elsewhere.

Spotify has reinforced retention with a smart bundling strategy. A Premium subscription now includes a multi-format bundle:

• Music: Access to more than 100 million tracks.
• Podcasts: Access to over 500,000 video and 6.5 million audio podcast shows.
• Audiobooks: 15 hours of listening time per month included in the base subscription.

By meeting multiple needs — entertainment, education, and storytelling — Spotify makes it harder for users to cancel than it is to drop a single-purpose video service.

Spotify’s Next Chapter: Video Growth Without the Cost

Spotify is not content to sit on audio dominance; it is expanding into video to capture additional watch time without building a costly movie studio.

The company recently initiated a partnership with Netflix, set to launch in early 2026, which will syndicate Spotify’s top video podcasts onto Netflix. The deal gives Spotify high-value video advertising inventory and broader brand exposure while leveraging existing assets — competing for video ad dollars with low incremental capital expenditure.

Despite these gains, the stock has pulled back into the $470–$480 range, largely because management issued conservative guidance for Q4. They forecast Q4 revenue of €4.5 billion (about $5.317 billion), slightly below the Wall Street consensus of €4.57 billion (approximately $5.4 billion). That shortfall was driven more by currency headwinds (a strong euro versus the dollar) than by a decline in user demand.

Many institutional analysts view the pullback as a technical entry point rather than a signal of fundamental weakness. For example, Citi recently upgraded the stock to a Buy with a $650 price target, implying more than 30% upside from current levels.

The upcoming earnings report on Feb. 10, 2026, will be a key catalyst. Investors will watch to see whether Spotify can validate its profitability trajectory. If it sustains a 30%+ gross margin target despite currency noise, it would bolster the case that the stock is undervalued relative to its growth potential.

Why Audio Resonates as a Defensive Growth Play

Spotify offers a rare combination today: recurring subscription revenue without the capital intensity of video production. While the consumer discretionary sector faces economic headwinds, Spotify’s transition into a high-margin audio utility provides a defensive layer atop growth potential.

By decoupling from the expensive, low-margin battles of video streaming, Spotify has clarified a path to long-term profitability. With dominant market share, proven pricing power, and new growth vectors in video and audiobooks, the company’s fundamentals remain solid. For investors willing to look past short-term volatility and currency fluctuations, the current stock price may offer an attractive way to buy into a long-term compounder at a discount.

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