Spotify Swings To Second-Quarter Loss, Missing Estimates
Monthly active users increased to 696 million, compared with analysts’ projections of 689.2 million.
Spotify Technology SA swung to a loss in the second quarter, missing analysts’ estimates after the music-streaming service recorded higher-than-expected expenses related to employee compensation.
Earnings dropped to a loss of 42 euro cents per share, the company said in a statement Tuesday, missing analysts' projections for a profit of €1.97. Revenue increased about 10% to €4.19 billion ($4.8 billion), compared with Wall Street estimates of €4.27 billion.
So-called social charges, which it has defined as payroll taxes associated with employee salaries and benefits, were €98 million higher than the company forecast because of its share price growth in the quarter, Spotify said. The company also blamed a change in its revenue mix for lowering operating income.
The platform has spent the past half year focused on growing both its video and advertising business. While Spotify is more commonly thought of as a music service, it’s trying to compete more directly with Alphabet Inc.’s YouTube by including videos on the service, including for podcasts, music videos and recorded concerts.
Paying subscribers grew to 276 million from the prior quarter, Spotify said, beating projections of 273.2 million. Monthly active users increased to 696 million, compared with analysts’ projections of 689.2 million.
The company said it expects to add users in the third quarter to bring its premium subscribers up to 281 million and overall users to 710 million. Revenue is expected to rise to €4.2 billion in the third quarter and will likely be hit by a weaker dollar, it said. Spotify forecast operating income of €485 million.
The financial outlook was weaker than analysts had forecast. They were anticipating €4.48 billion in revenue and €569.5 million in operating income in the third quarter, according to the average of estimates compiled by Bloomberg.
Earlier this year, the Stockholm-based company hosted an event for advertisers, pitching them to spend more money with the service. It launched a feature with generative artificial intelligence that can provide the voice for audio ads to make them more affordable.
Spotify’s shares dropped about 6.9% in premarket trading on Tuesday after closing at $700.98 in New York on Monday. The stock has gained 57% this year.
