Spotify soars 13% after announcing AI music deal with UMG, guidance

Spotify Shares rose 15% on Thursday after the music streaming platform offered guidance for 2030 and reached a deal with artificial intelligence. Universal MusicAs the technology triggers concerns of major disruption in the industry.

The company expects revenue at a compound annual growth rate in the mid-teens and gross margins of 35% to 40%. Spotify has called its plans to reach 1 billion subscribers and $100 billion in revenue its “north star.”

“We’re still firing on all cylinders,” Co-CEO Gustav Söderström told CNBC’s Julia Boorstin at the company’s first investor day since 2022. “We’re seeing strong growth in free users and subscribers.”

As part of the deal with Universal, Spotify will allow users to create covers and remixes using the voices of participating artists and songwriters.

Spotify said the tool will be released as a paid add-on for premium users, offering a new revenue stream for artists. The company previously said it was working with major music companies to create “responsible” AI products, but did not reveal any specific tools.

Söderström told CNBC that the Universal deal expands Spotify’s existing content catalog and allows artists and songwriters to benefit from AI innovations happening in the industry. The music company’s artists include Billie Eilish and Taylor Swift.

“As there was no legal licensing framework, it was not possible for existing creators to participate,” he said.

Spotify is in the midst of a change and the stakes are high.

Shares lost a quarter of their value last year. This is the company’s first investor day in four years under new co-CEOs Söderström and Alex Norström. Founder and former CEO Daniel Ek resigned earlier this year after nearly two decades at the helm.

Spotify is also trying to prove it can be more than a music streaming platform by betting on verticals like audiobooks and podcasts.

At the same time, the music industry is also going through a big change.

As platforms that generate music through requests grow in popularity and the lines between AI and human-made music blur, record labels are grappling with how to protect artists from copyright infringement.

Lawsuits have already been filed in the industry.

In 2024, Warner Music, UMG, and Sony sued AI music startups Suno and Udio, claiming the companies were using copyrighted songs to train AI models.

Suno, which raised $250 million in November, signed with Warner Music last year, inking a deal that allows users to create AI-generated music featuring participating artists. Universal and Warner settled on Udio.

Spotify also announced subscriptions for select creators on the platform and updates to its audiobook feature. The company also launched a program. let some mega fans buy two concert tickets before it goes on sale to the public.

Spotify said it has added more than 340 million new users to the platform since 2022 and increased its subscriber base by more than 110 million.