Keep an Eye on Netflix and Spotify
Both Netflix and Spotify deserve close monitoring. From Wall Street’s perspective, something is wrong with the companies. On a combined basis, Netflix’s and Spotify’s market caps have declined by 35% or $250 billion from peak levels. The move especially stands out relative to continued momentum that has flowed to Big Tech companies.
Wall Street trading behavior rarely tells the full story as the market is known to misprice business fundamentals. With that said, the broader stories surrounding Netflix’s and Spotify’s businesses do seem to have entered new chapters. At a time when Big Tech is seeing accelerated revenue growth, Netflix and Spotify are experiencing slowing revenue growth. Netflix management forecasts 13% revenue growth in 2026, down from 16% in 2024 and 2025. Excluding FX, Spotify revenue growth has declined from 20% to 15% over the past two years. For services companies generating nearly all their revenue from recurring streams, slowing revenue growth shouldn’t be brushed aside. To put those growth rates into perspective, Apple will report nearly 7x more revenue in 2026 compared to Netflix and Spotify on a combined basis while reporting stronger revenue growth (17%).
A major driver behind Netflix’s and Spotify’s slowing revenue growth is maturing paid subscriber growth. Netflix’s paid subscriber growth (net basis) was nearly cut in half from 42 million in 2024 to approximately 25 million in 2025. Spotify’s paid subscriber growth (net basis) has fared better, remaining relatively steady between 25 million and 30 million annually. However, given Spotify’s ballooning free user tally and
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Spotify Is Being Pulled in Different Directions
Deep down, Spotify wants to be the YouTube of audio. Daniel Ek has long been intrigued with the idea of controlling a marketplace where a seemingly infinite amount of user-generated content is matched with a billion customers. Such a goal requires a full-fledged journey into advertising. However, in recent quarters, Spotify has been pulled in a different direction.
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Spotify’s Ongoing Search for Profitability
Every few months, Spotify seems to go through a PR fiasco that leads to people saying the company has a toxic culture. The Joe Rogan saga created a wave of pushback that Spotify was incorrectly putting its thumb on the moderation scale. Due to periodic battles over payments to artists, Spotify has a reputation of being hostile to artists. Earlier this week, Spotify took on heat for announcing a substantial round of layoffs right before the holidays. These developments share something in common – each is rooted in Spotify’s desperate search for profit.
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The Spotify and Roku Squeeze
Spotify and Roku have a lot more in common than meets the eye (and ear). Both companies are fascinated with advertising-driven business models in which listener and viewer time and engagement is monetized via delivering ads. Roku is much further along in its advertising pursuit. Nearly 90% of Roku’s revenue is generated by ads while just 10% of Spotify revenue is from ads. However, both companies have signaled that advertising is where their growth and momentum will be found.
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Receive Exclusive Essays. The cornerstone of an Inside Orchard subscription is access to Neil’s weekly essays on the latest developments in the technology industry. Weekly essays are 1,000 words and sent via email on Mondays. Essays revolve around the following topics: technology industry analysis, business model analysis, technology’s impact on societal and consumer trends. A sample essay can be viewed here.
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