Spotify: Can upward EBIT revisions finally allow the stock to decouple from legacy media?

SPOT has traded in lock-step with legacy media equities for most of this year, but last week's results showed a fundamental divergence: legacy media faces slowing growth while defending profitability, whereas Spotify is entering a harvesting period in which margins are banked rather than reinvested. Spotify's 2027 consensus EBIT estimates appear to have bottomed while legacy media estimates face further cuts. We identify three controllable levers—moderating marketing spend, holding absolute AI spend flat, and gross-margin mix benefits from audiobooks and non-music content—that could add about €200M and lift FY27E EBIT to €3.92B, roughly 38% growth and ~5% above consensus. Management expects progress toward long-term margin targets with controlled opex growth. Label renewals are a swing variable; each 1% rise in recorded-music costs would reduce 2027 operating income by €75–80M. We remain Outperform and raise our price target to $725 from $625.