Spotify said on Tuesday it expects second-quarter operating income and additions to premium subscribers to come in below Wall Street forecasts, a development the company described alongside slower growth in its key markets of Europe and North America. The guidance sent the stock down about 6% in premarket trading.
Management pointed to operating income of 630 million euros for the second quarter, below the LSEG-compiled analyst consensus of 684 million euros. That guidance stands in contrast to Spotify's record operating income of 715 million euros in the first quarter, which beat estimates of 681.6 million euros and benefited from lower payroll taxes during the period.
The firm noted that payroll taxes - called social charges - are linked to the value of Spotify's share price, so declines in the stock can reduce the level of those charges. Spotify's shares have fallen about 15% so far this year.
On user metrics, Spotify forecast quarterly monthly active users (MAU) of 778 million, above estimates of 773 million, and projected a net increase in premium subscribers of 6 million to reach 299 million, which was below the 302 million analysts had expected. In the first quarter, premium subscribers rose 9% to 293 million, slightly trailing estimates of 294.5 million. MAU net additions of 10 million brought the total to 761 million, ahead of estimates of 756.6 million.
First-quarter revenue rose 8% to 4.53 billion euros, a figure that matched consensus estimates. For the second quarter the company forecast revenue of 4.8 billion euros, broadly in line with analysts' expectations of 4.77 billion euros. ($1 = 0.8555 euros)
Spotify's leadership team, now run by co-CEOs Gustav Soderstrom and Alex Norstrom after founder Daniel Ek moved to executive chairman in January, continues to contend with competition from music offerings provided by Apple and Amazon.com.
In recent years the company has emphasized the rollout of artificial intelligence-driven features designed to improve content discovery and drive engagement. Those additions include voice interaction for its personalized music tool AI DJ, the AI Playlist feature that generates playlists from natural-language prompts, and an expansion earlier this month of the Prompted Playlist capability to incorporate podcasts in playlists based on users' listening behavior.
Investors have been watching Spotify's path to profitability following prior price increases and cost-cutting measures as the company balances margin targets with continued product investment.
An AI-driven investment tool referenced in the original company materials evaluates SPOT alongside thousands of companies each month using more than 100 financial metrics, seeking to identify attractive risk-reward profiles without expressing human bias. That tool noted notable past winners in other stocks, and it offers users the ability to check whether SPOT appears in any of its strategies or to compare opportunities within the same sector.
Key takeaways:
- Spotify's Q2 operating income guidance of 630 million euros falls short of the 684 million euro analyst consensus.
- MAU guidance of 778 million beats estimates, while expected premium subscriber additions of 6 million to 299 million come in below the 302 million forecast.
- First-quarter revenue of 4.53 billion euros matched expectations; Q2 revenue guidance of 4.8 billion euros is roughly in line with consensus.