Spotify will net an eye-popping amount of money by raising prices again

Raise prices, marque much money. It's a elemental look close retired of a Finance 101 textbook.

And that look is acceptable to beryllium euphony to the ears of Spotify's (SPOT) CFO.

Spotify said this week it would hike the terms connected US idiosyncratic premium plans to $12.99 from $11.99. The duo (two-person) program is expanding to $18.99 from $16.99 a month. The household program is rising to $21.99 from $19.99. Student plans are besides expanding to $6.99 from $5.99.

In the process, Spotify has enactment itself successful the unenviable presumption of being the astir costly euphony streaming level erstwhile compared to Apple Music (AAPL) and Amazon Music (AMZN).

The terms increases volition adhd up big-time, according to the numbers crunched by Evercore ISI tech expert Mark Mahaney.

Mahaney estimated a 4% to 5% boost to income assuming the $1 terms summation crossed idiosyncratic and pupil plans and a $2 summation for duo and household plans. Assuming the aforesaid gross borderline illustration arsenic the existing business, Mahaney calculated an approximate $270 cardinal boost to gross profit, "most of which should travel down to operating income."

Key modeling assumptions helium made:

• 65 cardinal US subscribers.

• Roughly 45% of these 65 cardinal are connected idiosyncratic plans, and 44% are connected duo/family plans.

In total, Mahaney calculated an estimated 842 cardinal euros ($978 million) successful incremental gross from terms increases for 3 quarters of fiscal twelvemonth 2026.

"We proceed to presumption Spotify arsenic the planetary person successful streaming audio with accelerating monetization, beardown idiosyncratic growth, and improving profitability," Mahaney added. "Average gross per idiosyncratic enlargement is underway, supported by terms increases crossed 150+ markets and dependable retention, confirming Spotify’s pricing powerfulness and debased churn. We expect the afloat uplift to furniture successful done aboriginal 2026 alongside the forthcoming rollout of a higher priced Superfan/Premium+ tier."

Mahaney rated Spotify astatine Outperform with a $750 terms target, which assumes 47% upside from existent levels. Mahaney's terms people connected Spotify puts him supra the $730 mean of his Wall Street peers, per Yahoo Finance data. Of the 41 sell-side analysts that screen Spotify, 75% complaint the banal a Buy oregon Strong Buy.

Spotify is nary alien to lifting prices connected its customers.