In this article, we break down how recurring revenue works, why investors value it, and what the latest 2026 data says about subscriptions, memberships, retention, churn, and recurring-revenue growth. Using Costco and Spotify as the main examples, we’ll compare two very different business models, show how recurring revenue contributes to each company’s economics, explain the key metrics traders and investors should know, and look at how companies like Adobe, Salesforce, Microsoft, Netflix, and Tesla use recurring revenue in their own ways.
Costco sells rotisserie chickens and 48-packs of Kirkland toilet paper. Spotify sells access to music.
Yet underneath those wildly different businesses and products is the same extremely valuable financial engine:
Millions of customers repeatedly paying them for continued access, which in the world of business, accounting, trading and investing, is known as recurring revenue.
Below, we explore the importance of recurring revenue when considering investment ideas, why investors are often willing to pay a premium for businesses like Costco and Spotify that generate recurring revenue.
And more importantly, we’ll explore why it’s all connected to other companies like Netflix, Adobe, Microsoft, Salesforce, and even Tesla.
But first off, what exactly is recurring revenue?
Quick Answer — What Do Costco and Spotify Have in Common?
Recurring revenue is income a company can reasonably expect to collect repeatedly from existing customers through subscriptions, memberships, contracts, or similar ongoing weekly, monthly, quarterly or yearly relationships. Costco and Spotify use very different versions of this model. In fiscal 2025, Costco generated $5.323 billion in membership fees from $275.2 billion in total revenue, meaning memberships accounted for about 1.9% of its revenue. Spotify, by contrast, is built almost entirely around monthly recurring revenue: in Q2 2026, Premium subscriptions generated €4.331 billion of Spotify’s €4.777 billion in total revenue, or roughly 90.7%, from a base of 300 million Premium subscribers. Costco uses recurring revenue to strengthen a massive retail business; for Spotify, recurring revenue essentially is the business.
What Is Recurring Revenue?
Recurring revenue is income a company can reasonably expect to collect repeatedly from existing customers through subscriptions, memberships, contracts, or other ongoing relationships. Instead of starting from zero every month or year, the business enters each period with an existing base of customers already paying for continued access.
Costco generated $275.2 billion in total revenue in fiscal 2025, meaning membership fees represented only about 1.9% of total revenue. However, those annual memberships create a highly predictable revenue stream backed by renewal rates of roughly 90%.
Spotify generated €4.777 billion in total Q2 2026 revenue, with Premium subscriptions accounting for approximately 90.7% of the total. The company had reached 300 million Premium subscribers.
Key Recurring Revenue Statistics
From Costco memberships and Spotify Premium to SaaS subscriptions and customer churn, these numbers show just how large — and valuable — recurring revenue has become.
Costco: The $5+ Billion Membership Machine
Costco is a great example of how recurring revenue can matter far more than its share of total sales suggests.
In fiscal 2025, Costco generated $275.24 billion in total revenue, including $5.323 billion in membership fees.
Memberships represented only about 1.9% of total revenue, yet that fee revenue was equivalent to roughly 51% of Costco’s $10.38 billion in operating income.
That does not mean membership fees equal profit, but it shows how financially significant the recurring stream is inside a low-margin retail business.
Basically, Costco doesn’t make a huge amount of money every time someone throws another case of toilet paper or rotisserie chicken into their cart.
The company’s retail margins are intentionally thin.
But they do have a sustainable, reliable, and… recurring revenue stream thanks to membership fees. To illustrate this, Costco’s merchandise gross margin was only about 11.1% in fiscal 2025, which makes predictable membership income especially valuable.
Costco Membership Statistics
The membership engine continued growing in fiscal 2026. At the end of Q3, Costco reported:
During the first 36 weeks of fiscal 2026, membership-fee revenue reached $4.057 billion, up approximately 13% YoY.
The most important number may be the renewal rate.
With nearly 90% of members worldwide renewing, Costco does not have to rebuild its customer base every year. Most existing memberships continue generating revenue while new members are added on top.
That’s the power of the brand’s recurring revenue stream!
Spotify: 300 Million Recurring Customers
Spotify shows the other side of the recurring-revenue model.
Unlike Costco, where membership fees make up only a small percentage of total revenue, Spotify is built almost entirely around recurring subscription revenue.
In Q2 2026, Spotify generated €4.777 billion in total revenue, including €4.331 billion from Premium subscriptions.
That means Premium subscriptions accounted for a whopping 90.7% of Spotify’s quarterly revenue.
In other words, for Spotify, recurring revenue isn’t just an important part of the business.
It basically is the business.
Spotify Subscription Statistics
Spotify ended Q2 2026 with:
Spotify entered 2026 with 290 million Premium subscribers, up from 263 million a year earlier.
By Q2, that number had already climbed to 300 million. But subscriber growth is only one part of the equation.
During the first six months of 2026, Spotify’s Premium average revenue per user increased about 4%, from €4.65 to €4.82. Price increases contributed roughly €0.45 of improvement before being partially offset by currency movements and changes in geographic and product mix.
That highlights another major advantage of recurring-revenue businesses, which is that Spotify can actually grow its business without even adding a new subscriber.
Instead, it has the option to increase recurring revenue through several different levers:
Basically, this means revenue can grow even when subscriber growth slows.
Spotify isn’t limited to a single growth lever. Over the business’ long-run economics, they can influence their revenue in a handful of different ways, making the business more flexible and adaptable compared to other business models.
Ultimately, Costco uses recurring revenue to strengthen an enormous retail operation. Spotify takes the concept further: 300 million customers repeatedly paying for access to the same platform, month after month.
That makes subscriber growth, retention, pricing power, and ARPU some of the most important numbers for investors watching SPOT.
What Costco and Spotify Teach Investors
Costco and Spotify look nothing alike operationally, yet both show why recurring revenue can be so attractive to investors.
Costco uses memberships to support a massive physical retail business, while Spotify relies on Premium subscriptions for nearly all of its revenue.
In one case, recurring revenue is a highly valuable support system; in the other, it is the core business model.
The comparison also shows that recurring revenue does not require a software company.
A warehouse retailer can charge an annual membership fee. A streaming platform can charge monthly. Microsoft can charge businesses per user, Adobe can charge creators for software access, Salesforce can sell multiyear contracts, and Tesla can attempt to monetize software features after the vehicle itself has already been sold.
The underlying principle is the same: the customer relationship continues after the original sale.
Costco vs. Spotify: Two Very Different Recurring-Revenue Models
| Metric | Costco | Spotify |
|---|---|---|
| Core product | Physical retail | Digital audio |
| Recurring mechanism | Annual membership | Premium subscription |
| Paying customers | 82.9M paid memberships | 300M Premium subscribers |
| Retention indicator | 89.7% worldwide renewal rate | Subscriber growth, churn and ARPU |
| Latest recurring revenue | $1.373B quarterly membership fees | €4.331B quarterly Premium revenue |
| Share of total revenue | ~2% | ~91% |
| Role recurring revenue plays | Supports retail economics | Core business model |
| Pricing opportunity | Membership fee increases and upgrades | Price increases, plan tiers and add-ons |
Why Recurring Revenue Is So Valuable to Businesses
Recurring revenue gives businesses something ordinary one-time sales do not: a revenue base that survives into the next period.
A company with 100,000 subscribers paying $10 per month generates $1 million in monthly recurring revenue (MRR), or $12 million in annual recurring revenue (ARR).
If it retains 90% of that base, it starts the next year with roughly $10.8 million still intact.
At 70% retention, only $8.4 million remains — meaning the lower-retention business has to replace an extra $2.4 million every year just to get back to the same starting point.
Recurring revenue can also compound from existing customers.
If a company starts with $100 million in recurring revenue, loses $5 million to churn, loses $2 million to downgrades, and gains $15 million from upgrades, its net revenue retention is 108%.
It grew its existing customer base before signing a single new customer.
The same dynamic shows up in pricing. Spotify’s Premium ARPU increased about 4% in the first half of 2026, while Costco said membership fee increases accounted for roughly 35% of its membership-income growth during the first 36 weeks of FY2026.
That is the core advantage: recurring-revenue businesses can grow through retention, upgrades, price increases, and returning customers — not just by constantly finding new ones.
Recurring Revenue Metrics Traders & Investors Should Know
The following recurring revenue metrics tend to show up most often during earnings season, when companies report subscriber growth, retention, contract values, recurring revenue, and forward-looking obligations alongside traditional earnings statistics like revenue and EPS.
For traders and investors, understanding these terms makes it much easier to judge whether a company is growing sales or actually building a durable, repeatable revenue base.
Recurring-Revenue Giants
Costco and Spotify are far from alone.
Some companies generate almost all of their revenue through subscriptions, while others use recurring revenue as an additional layer on top of an already larger and profitable business.
Adobe is one of the clearest examples: in FY2025, $22.90 billion of its $23.77 billion in revenue came from subscriptions, or roughly 96%, while ARR reached $25.20 billion.
Salesforce generated about 95% of FY2026 revenue from subscription and support, while Microsoft produced $214.4 billion in Cloud revenue and continued expanding its Microsoft 365 subscriber base.
Netflix operates almost entirely around recurring streaming payments, while Tesla shows how a physical-product company can attempt to add recurring software revenue after the initial sale through services such as FSD and Premium Connectivity.
Other Companies With Recurring Revenue
| Company | Recurring Model | Key Numbers |
|---|---|---|
| Adobe | Creative Cloud and software subscriptions | $22.9B subscription revenue; 96% of FY2025 revenue |
| Salesforce | Enterprise subscriptions and support | $39.4B subscription/support revenue; about 95% of FY2026 revenue |
| Microsoft | Microsoft 365, Azure and cloud contracts | $214.4B Microsoft Cloud revenue in FY2026, up 27% |
| Netflix | Monthly streaming subscriptions | $45.18B streaming revenue in 2025, up 16% |
| Tesla | Vehicle software and connectivity subscriptions | $99/month FSD and $13.99/month Premium Connectivity in Canada |
Recurring revenue can also appear through Amazon Prime memberships, telecom contracts, insurance premiums, gym memberships, cloud infrastructure, financial-data subscriptions, news subscriptions, maintenance agreements, and professional memberships.
Conclusion: Why Recurring Revenue Matters to Investors
Costco and Spotify sell completely different things, but from an investor’s perspective, they share one powerful advantage:
Customers who keep coming back and paying again.
Costco has renewal rates near 90% worldwide. Spotify has 300 million Premium subscribers generating roughly 91% of quarterly revenue.
That kind of recurring revenue can make a business easier to forecast, more resilient, and more capable of compounding growth from an existing customer base.
Still investors need to ask the harder questions: How strong is retention? What are the margins? How expensive is customer acquisition? And what valuation are you paying for all of it?
But the big takeaway is that Costco and Spotify don’t just have customers. They have customers who are already lined up to pay them again.
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FAQ — Recurring Revenue Statistics
What is recurring revenue?
Recurring revenue is income a business expects to collect repeatedly from existing customers through subscriptions, memberships, contracts, or similar ongoing relationships. Examples include Spotify Premium, Costco memberships, Microsoft 365, Netflix, insurance premiums, and software contracts.
Why is recurring revenue important to investors?
Recurring revenue can make sales and cash flows easier to forecast because a portion of future revenue already comes from existing customers. High retention also allows companies to grow through renewals, upgrades, price increases, and expansion revenue instead of rebuilding sales from scratch.
What is the difference between recurring revenue and subscription revenue?
Subscription revenue is one type of recurring revenue, but recurring revenue can also come from memberships, long-term contracts, support agreements, insurance premiums, usage-based services, and maintenance agreements. Costco memberships are a good example of recurring revenue that is not traditional subscription software.
What is annual recurring revenue (ARR)?
Annual recurring revenue, or ARR, estimates the annual value of a company’s recurring revenue base. For example, a business generating $100,000 in monthly recurring revenue would have approximately $1.2 million in ARR if that monthly level remained consistent.
What is monthly recurring revenue (MRR)?
Monthly recurring revenue, or MRR, measures predictable recurring revenue generated in a typical month. A business with 100,000 customers paying $10 per month would generate $1 million in MRR.
What is net revenue retention (NRR)?
Net revenue retention measures how much recurring revenue remains from existing customers after accounting for churn, downgrades, upgrades, and expansion revenue. An NRR above 100% means existing customers are generating more revenue than they did previously.
What is gross revenue retention (GRR)?
Gross revenue retention measures how much recurring revenue a company retains after churn and downgrades, excluding upgrades or expansion revenue. It gives investors a cleaner view of how much of the original revenue base is being preserved.
What is churn in a recurring-revenue business?
Churn measures customers or recurring revenue lost through cancellations, downgrades, or non-renewals. Recurly’s 2026 data found that 52% of consumers canceled at least one subscription in the prior year, with lack of use and price among the most common reasons.
What is a good customer retention rate?
There is no single good retention rate because benchmarks vary by industry and customer type. However, ChartMogul data suggests companies with retention above 85% can grow roughly 1.5–3× faster than businesses with weaker retention.
Does Costco have recurring revenue?
Yes. Costco generated $5.323 billion in membership-fee revenue in fiscal 2025 and reported 82.9 million paid memberships with an 89.7% worldwide renewal rate in Q3 FY2026.
What percentage of Spotify revenue comes from subscriptions?
In Q2 2026, Spotify generated €4.331 billion in Premium revenue from €4.777 billion in total revenue, meaning Premium subscriptions accounted for approximately 90.7% of quarterly revenue.
Which companies generate recurring revenue?
Major recurring-revenue companies include Costco, Spotify, Microsoft, Adobe, Salesforce, Netflix, Amazon, telecom providers, insurers, gyms, and many SaaS businesses. Recurring revenue is an economic model that appears across many different industries.
Is recurring revenue guaranteed revenue?
No. Recurring revenue is generally predictable, not guaranteed. Customers can cancel, fail to renew, downgrade, or switch to competitors, which is why churn and retention remain critical metrics.
Does recurring revenue make a company more valuable?
It can. Predictable revenue, high retention, strong margins, and low churn can improve visibility and make future cash flows easier to estimate, but recurring revenue with poor economics is not automatically valuable.
Does recurring revenue automatically make a stock a good investment?
No. Investors still need to consider revenue growth, margins, free cash flow, debt, competition, customer acquisition costs, retention, and valuation. A good recurring-revenue business can still be a poor investment if the stock is too expensive.
Should I invest in Costco (COST)?
Costco has attractive recurring-revenue characteristics, including 82.9 million paid memberships, renewal rates near 90%, and more than $5 billion in annual membership-fee revenue, but whether COST is a good investment depends heavily on its valuation, growth expectations, margins, and how much quality is already priced into the stock.
Should I invest in Spotify (SPOT)?
Spotify has a strong recurring-revenue model with 300 million Premium subscribers and roughly 90.7% of Q2 2026 revenue coming from Premium, but investors should also consider subscriber growth, churn, ARPU, margins, royalty costs, competition, and valuation before deciding whether SPOT is attractive.
Which is the better recurring-revenue business: Costco or Spotify?
They use recurring revenue differently. Costco uses memberships to strengthen a low-margin retail business, while Spotify depends on subscriptions for nearly all of its revenue; the better investment ultimately depends on growth, retention, margins, cash flow, and valuation.
What is the biggest advantage of recurring revenue?
The biggest advantage is that a company does not have to rebuild its entire revenue base every year. If a business retains 90% of $12 million in ARR, it starts the next year with roughly $10.8 million still intact before adding any new customers.
References
Adobe Inc. (2026). 2025 annual report (Form 10-K). U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/796343/000079634326000003/adbe-20251128.htm
ChartMogul. (2026). Customer retention benchmarks. https://help.chartmogul.com/
Costco Wholesale Corporation. (2025). Annual report for the fiscal year ended August 31, 2025 (Form 10-K). U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/909832/000090983225000101/cost-20250831.htm
Costco Wholesale Corporation. (2026, May 28). Costco Wholesale Corporation reports third quarter and year-to-date operating results for fiscal 2026. https://investor.costco.com/news/news-details/2026/Costco-Wholesale-Corporation-Reports-Third-Quarter-and-Year-To-Date-Operating-Results-For-Fiscal-2026/default.aspx
Microsoft Corporation. (2026). FY26 Q4 investor metrics. Microsoft Investor Relations. https://www.microsoft.com/en-us/investor/earnings/fy-2026-q4/metrics
Netflix, Inc. (2026). Annual report for the year ended December 31, 2025 (Form 10-K). U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1065280/000106528026000034/nflx-20251231.htm
Recurly. (2026). The 2026 state of subscriptions. https://recurly.com/content/state-of-subscriptions-report/
Salesforce, Inc. (2026). Fiscal 2026 results and annual filings. U.S. Securities and Exchange Commission. https://www.sec.gov/edgar/browse/?CIK=1108524
Spotify Technology S.A. (2026). Interim report for the six months ended June 30, 2026 (Form 6-K). U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1639920/000162828026052543/spot-20260630x6xk.htm
Spotify. (2026, August 4). Spotify reports second quarter 2026 earnings. Spotify Newsroom. https://newsroom.spotify.com/2026-08-04/spotify-q2-2026-earnings/
Tesla, Inc. (n.d.). Connectivity. Tesla Support Canada. Retrieved August 29, 2026, from https://www.tesla.com/en_ca/support/connectivity
Tesla, Inc. (n.d.). Full Self-Driving (Supervised) subscriptions. Tesla Support Canada. Retrieved August 29, 2026, from https://www.tesla.com/en_ca/support/full-self-driving-subscriptions
Zuora, Inc. (2025, April 15). Zuora Subscription Economy Index continues to outperform S&P 500. https://www.zuora.com/press-release/zuora-subscription-economy-index-2025/
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