- Spotify reported revenue of €4.53 billion on earnings of €3.45 per share.
- Wall Street was expecting revenue of €4.52 billion on earnings of €2.95 per share, per analyst estimates compiled by Yahoo Finance
- Shares of the music streaming giant fell 13.5% on Tuesday following a weaker than expected outlook
Spotify continued to see improvements in profitability, driven by subscriber gains and recent price increases. But the better than expected results for the first quarter were overshadowed by weaker than expected guidance, causing the music streaming giant’s shares to plummet 13.5% on Tuesday.
The company added 3 million premium subscribers for a total of 293 million globally, while total monthly active users grew 9% year over year to 761 million, while ad-supported MAUs grew 14% to 483 million. The results were driven by “broad-based regional growth,” led by the Latin America and Europe, as well as Spotify’s Rest of World segment. Premium growth also benefitted from “strong global promotional campaign intake,” while MAU growth was boosted by the global launch of mobile free tier enhancements.
Operating profit grew 40% to a record €715 million, while revenue grew 8% to €4.53 billion, driven by subscriber gains and price increases. Net income more than tripled to €721 million, which included €222 million in finance income and a €216 million tax benefit. Premium revenue grew 10% to €4.15 billion, while ad-supported revenue fell 5% to €385 million. Music advertising was driven by growth in impressions sold, partially offset by “softness in pricing.” Automated sales channels represented over 30% of advertising growth.
Spotify has 7 million podcast titles, over 590,000 video podcast shows and more than 700,000 audiobooks in English language markets available on the platform. Podcasting growth was led by sponsorship gains within Spotify’s Owned & Licensed portfolio.
Looking ahead, Spotify is forecasting that it will add 6 million premium subscribers for a total of 299 million and 17 million MAUs for a total of 778 million. It also anticipates a 14.5% increase in total revenue to €4.8 billion, operating income of €630 million and an operating margin of 33.1%.
“We’re well positioned, because of our large engaged user base, our deep creative relationships, and years of investment in personalization and infrastructure at scale to arrive at this agentic moment. Together, these create a platform that can take advantage of this moment and unlock entirely new growth vectors that will enable us to climb to new mountains previously unimaginable,” Spotify co-CEO Gustav Söderström told analysts on Tuesday. “This connects to the broad opportunity ahead. We see significant room to grow across users, formats and engagement and to really expand what Spotify is and can become over time, we’re at a pivotal moment, building towards something even bigger.”
Spotify launches new features
During the quarter, Spotify launched a beta for its new Taste Profile feature, which allows Premium users to steer what the see on the company’s homepage. The beta is available in New Zealand with more markets to follow.
It also expanded its Prompted Playlist beta to Premium listeners across the U.S. and Canada, given them a new way to describe exactly what they want to hear using their own words and put meaningful control of the algorithm directly in their hands. The feature has also expanded beyond music to now include podcasts.
Additionally, Spotify launched a global beta for a new feature called SongDNA, which gives fans an immersive way to explore the writers, producers, collaborators, samples, interpolations and covers behind the music they love. Since launching four weeks ago, the feature is up to 52 million users.
Other new features include About the Song, which launched in beta in select markets and brings stories and context directly into the listening experience through short, swipeable cards that explore the meaning behind the music listeners are hearing, and Audiobook charts, which provide weekly rankings of the top audiobooks overall and by genre to make it easier for listeners in the U.S. and U.K. to discover what’s popular and trending.
Executives tout Peloton partnership, AI opportunity
In addition to its new features, Spotify has announced a fitness programming partnership with Peleton.While executives declined to comment on specifics of the deal, they noted that nearly 70% of Spotify’s premium users work out monthly and that its users have created over 150 million workout-centered playlists.
“I can let you know that this is content that’s ad free. It’s high quality content that normally resides within subscriptions that retail at much higher price,” Söderström told analysts on Tuesday. “So we’re putting that on premium inside the fitness category.”
Executives also said there is also an opportunity to expand creator access to using AI tools.
“We don’t think existing artists should be left out of AI. We think that may actually be the most interesting part of music. If you look at other industries, existing IP is actually the most valuable IP, not the least valuable. But because of how AI music works right now, that is not addressable. That’s the problem we want to solve,” Söderström added. “We think there’s a big opportunity for creators and for Spotify and for investors there. There’s a big opportunity to expand the music catalog, and that is obviously good for us, but we think there is also a big opportunity for existing artists that isn’t addressed.”
