Anthony Di Pizio, The Motley Fool

Fri, Jun 20, 2025, 1:12 AM6 min read

• Spotify operates the world's largest music streaming platform, and it's investing heavily in technology to maintain its edge over the competition.

• Spotify continues to deliver strong financial results, driving its stock to a 57% gain in 2025 already.

• Spotify stock is now extremely expensive by at least two widely used valuation metrics, which could limit its upside from here.

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The S&P 500 (SNPINDEX: ^GSPC) was down by as much as 15% earlier this year on the back of simmering global trade tensions, which were ignited by President Trump's "Liberation Day" tariffs in April. The index has since recovered its losses, and it's now sitting on a modest year-to-date gain of 2%.

But investors who bought Spotify (NYSE: SPOT) stock at the start of the year have earned an eye-popping 57% return as of this writing (June 18). In fact, the stock never dipped into the red at all, despite the turmoil in the broader market.

Shares of the music streaming giant are now trading at a record high, and while the company's future looks extremely bright, there is one glaring reason investors should be cautious from here.

According to Statista, Spotify has a 31.7% global market share in the music streaming industry. It's a long way ahead of Tencent Music in second place, with 14.4% of the market.

Most music streaming platforms feature very similar content catalogs, so they have to compete with one another on price, technology, and by offering other content formats. That's why Spotify invested heavily to become one of the world's top podcast platforms. Plus, during the first quarter of 2025 (ended March 31), the company said users spent 44% more time watching video content compared to the year-ago period, so it introduced a new compensation model to encourage creators to make video versions of their podcasts to capitalize on that engagement. This new system paid out over $100 million during the first quarter alone, which could result in a flood of new content from creators who want to earn more money.

Spotify is also investing heavily in artificial intelligence (AI) to deliver the best user experience from a technological perspective. AI is a big part of the platform's recommendation engine, because it quickly learns what each user likes and feeds them more of it. But Spotify has also launched a series of user-facing features powered by AI like AI Playlist, which can generate a list of songs based on a simple prompt from the user, whether it be a movie, feeling, animal, or even a color.