Spotify forecasts second-quarter profit below estimates, shares slump
Spotify's Second-Quarter Outlook and Market Response
April 28 (Reuters) - Spotify forecast second-quarter earnings and premium subscribers below Wall Street estimates on Tuesday, a sign of slowing growth for the Swedish streaming giant in its major markets of Europe and North America.
Shares of the company fell nearly 9% in premarket trading.
Profitability and Investor Sentiment
Investors closely monitor Spotify's profitability after price hikes and cost-cutting efforts in recent years amid its growing focus on adding artificial intelligence features to improve discovery and engagement.
Second-Quarter Operating Income Forecast
Spotify expects operating income of 630 million euros ($736.41 million) for the second quarter, below LSEG-compiled analysts' average estimate of 684 million euros.
Comparison with First-Quarter Performance
That sharply contrasted with Spotify's record operating income of 715 million euros in the first quarter, helped by lower payroll taxes. It beat estimates of 681.6 million euros.
Such taxes, called social charges, are tied to the value of the company's share price, as lower stock prices can lead to a decline in charges. Spotify's shares have fallen around 15% so far this year.
Leadership and Competitive Landscape
The company, led by co-CEOs Gustav Soderstrom and Alex Norstrom after founder Daniel Ek became executive chairman in January, competes with music streaming offerings from Apple and Amazon.com.
AI Features and Product Expansion
Spotify rolled out AI features in recent years by adding voice interaction to its personalized music tool AI DJ and introducing AI Playlist for generating playlists using natural-language prompts.
Earlier this month, the company also expanded its Prompted Playlist feature, which lets users create playlists based on their listening habits, to include podcasts.
Subscriber Growth and Revenue Performance
Its quarterly monthly active users (MAU) forecast of 778 million exceeded estimates of 773 million, while its prediction for a 6 million increase in premium subscribers to 299 million was below estimates of 302 million.
Premium subscribers rose 9% to 293 million in the first quarter, compared with estimates of 294.5 million. Its MAU net additions of 10 million brought the total to 761 million, exceeding estimates of 756.6 million.
First-quarter revenue rose 8% to 4.53 billion euros, in line with estimates. The revenue forecast of 4.8 billion euros for the second quarter was also largely in line with estimates of 4.77 billion euros.
Currency Exchange Rate
($1 = 0.8555 euros)
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)